Yes, non-current assets are also known as fixed assets. These are long-term assets that are not intended for sale but are used by a company in its business operations. Examples of non-current assets include property, plant, and equipment, as well as intangible assets like patents and trademarks. TheRead more
Yes, non-current assets are also known as fixed assets. These are long-term assets that are not intended for sale but are used by a company in its business operations.
Examples of non-current assets include property, plant, and equipment, as well as intangible assets like patents and trademarks. These assets are recorded on a company’s balance sheet and are reported at their historical cost or at their fair market value, depending on the type of asset.
Generally, Assets are classified into two types. Non-Current Assets Current Assets Non-Current Asset Noncurrent assets are also known as Fixed assets. These assets are an organization's long-term investments that are not easily converted to cash or are not expected to become cash within an acRead more
Generally, Assets are classified into two types.
Non-Current Assets
Current Assets
Non-Current Asset
Noncurrent assets are also known as Fixed assets. These assets are an organization’s long-term investments that are not easily converted to cash or are not expected to become cash within an accounting year.
In general terms, In accounting, fixed assets are assets that cannot be converted into cash immediately. They are primarily tangible assets used in production having a useful life of more than one accounting period. Unlike current assets or liquid assets, fixed assets are for the purpose of deriving long-term benefits.
Unlike other assets, fixed assets are written off differently as they provide long-term income. They are also called “long-lived assets” or “Property Plant & Equipment”.
Examples of Fixed Assets
Land
Land improvement (e.g. irrigation)
Building
Building (work in progress)
Machinery
Vehicles
Furniture
Computer hardware
Computer software
Office equipment
Leasehold improvements (e.g. air conditioning)
Intangible assets like trademarks, patents, goodwill, etc. (non-current assets)
Valuation of Fixed asset
fixed assets are recorded at their net book value, which is the difference between the “historical cost of the asset” and “accumulated depreciation”.
“Net book value = Historical cost of the asset – Accumulated depreciation”
Example:
Hasley Co. purchases Furniture for their company at a price of 1,00,000. The Furniture has a constant depreciation of 10,000 per year. So, after 5 years, the net book value of the computer will be recorded as
1,00,000 – (5 x 10,000) = 50,000.
Therefore, the furniture value should be shown as 50,000 on the balance sheet.
Presentation in the Balance Sheet
Both current assets and non-current assets are shown on the asset side(Right side) of the balance sheet.
Difference between Current Asset and Non-Current Asset
Current assets are the resources held for a short period of time and are mainly used for trading purposes whereas Fixed assets are assets that last for a long time and are acquired for continuous use by an entity.
The purpose to spend on fixed assets is to generate income over the long term and the purpose of the current assets is to spend on fixed assets to generate income over the long term.
At the time of the sale of fixed assets, there is a capital gain or capital loss but at the time of the sale of current assets, there is an operating gain or operating loss.
The main difference between the fixed asset and current asset is, although both are shown in the balance sheet fixed assets are depreciated every year and it is valued by (the cost of the asset – depreciation) and current asset is valued as per their current market value or cost value, whichever is lower.
Non-current assets are long-term investments that are not easily converted into cash within an accounting year. They are required for the long term in the business. They have a useful life of more than an accounting year. Non-current assets can be fixed assets and intangible assets. Fixed assets areRead more
Non-current assets are long-term investments that are not easily converted into cash within an accounting year. They are required for the long term in the business. They have a useful life of more than an accounting year.
Non-current assets can be fixed assets and intangible assets. Fixed assets are tangible assets that can be seen and touched. Whereas, intangible assets are those assets that can not be seen and touched.
You can correlate examples of Non-Current Assets with tangible and intangible assets as mentioned below:
Land and building – They are fixed assets that will give long-term benefits and will be classified as noncurrent assets.
Plant and Machinery – They are tangible assets will give future benefits and are thus mentioned under noncurrent assets.
Office Equipment – They are tangible assets that will give future economic benefits to the company, and comes under noncurrent assets.
Vehicles – They are tangible assets that will give long-term benefits, and will be classified as noncurrent assets.
Furniture – They are also tangible assets that will give future benefits and are classified as non-current assets.
Trademarks – These are intangible assets that will not be easily converted into cash and will be classified as noncurrent assets.
Goodwill – They are intangible assets that can’t be easily converted into cash, and are classified as non-current assets.
Patents – They are intangible assets that will not be converted into cash within an accounting period, and are classified as non-current assets.
Copyrights – They are intangible assets that will not be converted into cash within an accounting period, and are classified as non-current assets.
Long-term Investments – They are long-term investments that will not be easily converted into cash within an accounting period and are classified as non-current assets.
Non-current Assets = Total Liabilities – Current Assets
Current Assets are the assets that will be converted into cash within an accounting year. They include cash, bank, debtors, etc.
Shareholder's Equity Meaning - Shareholder's Equity is the amount invested into the Company. It represents the Net worth of the Company. It is also where the owners have the claim on the Assets after the Debts are settled. It Calculation of Shareholder's Equity Method 1 Shareholder's Equity = TotalRead more
Shareholder’s Equity
Meaning – Shareholder’s Equity is the amount invested into the Company. It represents the Net worth of the Company. It is also where the owners have the claim on the Assets after the Debts are settled. It
Calculation of Shareholder’s Equity
Method 1
Shareholder’s Equity = Total Assets – Total Liabilities
Straight Line Depreciation Journal Entry Straight-line depreciation refers to the diminishing value of assets over the life of the asset. In other words, the cost of the asset spreads evenly over the useful life of the assets. The salvage value or Residual value of an asset means the estimated valueRead more
Straight Line Depreciation Journal Entry
Straight-line depreciation refers to the diminishing value of assets over the life of the asset. In other words, the cost of the asset spreads evenly over the useful life of the assets.
The salvage value or Residual value of an asset means the estimated value of the asset at the end of its useful life.
The depreciation can also be charged with another method like Written Down Value (WDV) Method.
Formula
Depreciation per annum = ( Cost of asset – Salvage Value) / Useful Life
The journal entry for the depreciation is:
JOURNAL ENTRIES
Depreciation on Asset A/C DR.
To Asset A/C
(Being depreciation charged on asset)
Now let us understand this with an example, suppose XYZ Ltd. has an asset of value 90,000 with a useful life of 3 years. The company uses the straight-line method of depreciation to depreciate the asset in its book.
So, the depreciation per annum would be calculated as:-
= 90,000/3
= 30,000
In Year 1, the depreciation will be charged as 30,000 for this year. It will be debited to the depreciation account and credited to the asset account. Thus, the value of the asset at the end of year 1 will be 60,000 (90,000-30,000).
JOURNAL ENTRIES
DR
CR
Depreciation on Asset A/C 30,000
To Asset A/C 30,000
(being depreciation charged on asset)
In Year 2, the depreciation will be charged as 30,000. The entry would be the same as the previous year. The value of the asset at the end of year 2 will be 30,000 (60,000-30,000).
JOURNAL ENTRIES
DR
CR
Depreciation on Asset A/C 30,000
To Asset A/C 30,000
(being depreciation charged on asset)
At last in Year 3, the depreciation will be charged 30,000. The entry would be the same. The value of the asset at the end of year 3 will be Nil (30,000- 30,000).
JOURNAL ENTRIES
DR
CR
Depreciation on Asset A/C 30,000
To Asset A/C 30,000
(being depreciation charged on asset)
The depreciation will be charged to the profit and loss account for the year as it is an expense for the company.
The entries will be posted into depreciation account as mentioned:
When the Accumulated depreciation account is not maintained, the journal entry for vehicle depreciation shall be Particulars Debit Credit Depreciation a/c Dr. (xxx) To Vehicle a/c (xxx) (Being DepreciationRead more
Whenthe Accumulated depreciation account is not maintained, the journal entry for vehicle depreciation shall be
Particulars
Debit
Credit
Depreciation a/c Dr.
(xxx)
To Vehicle a/c
(xxx)
(Being Depreciation charge on Vehicle made)
For example, let us assume that a vehicle (Bike) was purchased on 1st April 2019 with INR. 2,50,000, the rate of depreciation is 15% and also the Company follows the straight-line method of calculating depreciation.
Then the journal entries shall be,
The depreciation charge for the 1st Year
Date
Particulars
Debit
Credit
31-03-2020
Depreciation a/c Dr.
37,500
To Vehicle a/c
37,500
(Being Depreciation made on Vehicle)
The depreciation charge for the 2nd Year
Date
Particulars
Debit
Credit
31-03-2021
Depreciation a/c Dr.
37,500
To Vehicle a/c
37,500
(Being Depreciation made on Vehicle)
The depreciation charge for the 3rd Year
Date
Particulars
Debit
Credit
31-03-2022
Depreciation a/c Dr.
37,500
To Vehicle a/c
37,500
(Being Depreciation made on Vehicle)
The respective ledger accounts for all three years are given below:
Whenthe Accumulated depreciation account is maintained, the journal entry for vehicle depreciation shall be
Particulars
Debit
Credit
Depreciation a/c Dr.
(xxx)
To Accumulated depreciation a/c
(xxx)
(Being Depreciation charge on Vehicle made)
Taking the above said example,
The depreciation charge for the 1st Year
Date
Particulars
Debit
Credit
31-03-2020
Depreciation a/c Dr.
37,500
To accumulated depreciation a/c
37,500
(Being Depreciation made on Vehicle)
The depreciation charge for the 2nd Year
Date
Particulars
Debit
Credit
31-03-2021
Depreciation a/c Dr.
37,500
To accumulated depreciation a/c
37,500
(Being Depreciation made on Vehicle)
The depreciation charge for the 3rd Year
Date
Particulars
Debit
Credit
31-03-2021
Depreciation a/c Dr.
37,500
To accumulated depreciation a/c
37,500
(Being Depreciation made on Vehicle)
The respective ledger accounts for all three years are given below:
Partnership Firm Persons who have entered into a partnership with one another to carry on a business are individually called “Partners“; collectively called a “Partnership Firm”; and the name under which their business is carried on is called the “Firm Name” In simple words, A partnership is an agreRead more
Partnership Firm
Persons who have entered into a partnership with one another to carry on a business are individually called “Partners“; collectively called a “Partnership Firm”; and the name under which their business is carried on is called the “Firm Name”
In simple words, A partnership is an agreement between two or more people who comes together to run a business on a partnership deed, which is called a Partnership firm. A Partnership Deed is a written agreement between partners who are willing to form a Partnership Firm. It is also called a Partnership Agreement.
It has no separate legal entity which cannot be separated from the members. It is merely a collective name given to the individuals composing it. This means, a partnership firm cannot hold property in its name, and neither it can sue nor be sued by others.
Contents of a Partnership Deed
A Partnership Deed shall mainly include the following contents:
Name of the Partnership firm
Address of the Partnership firm
Details of all the Partners
Date of commencement of the Business
The amount of capital contributed by each of the partners forming the Partnership firm
The Profit sharing ratio (The Business profit shared among the partners on a ratio basis)
The rate or amount of Interest on Capital & the rate or amount of Interest on drawings to each partner respectively.
The salary is payable to each of the partners of the firm.
The rights, duties, and power of each partner of the firm.
The duration of the existence of the firm
Types of Partners
The following are the various types o partners
Working partner or Active partner
Sleeping partner
Limited partner
Partner in profit only
Nominal or quasi partner
Minor as a partner
Types of Partnership Firms
There are four types of partnership which are as below.
General Partnership
Limited Partnership
Partnership at will
Particular Partnership
Essential characteristics of a partnership firm
Two or More persons: There must be at least two persons to form a partnership. A person cannot enter into a partnership with himself. The maximum number of persons in a partnership should not exceed 50.
Agreement between partners: There must be an agreement between the parties in a partnership. The relation of partnership arises from the formation of a contract i.e., Partnership deed.
Mutual Agency: Partnership business can be carried on by all the partners or by any of them acting on behalf of the others. in simple words, every partner is an agent to the other partners and of the form. Each partner is liable for acts performed by other partners on behalf of the firm.
Registration of Firm: Registration of a partnership firm is not compulsory under the Act. The only document or even an oral agreement among partners required is the ‘partnership deed’ to bring the partnership into existence.
Unlimited Liability:the liability of the partners is unlimited for the debts of the firm. In case the assets of the firm are insufficient to pay the debts in full, the personal property of each partner can be attached to pay the creditors of the firm.
Non-Transferability of interest: there is a restriction in the transfer of shares of profits of the partnership without the prior consent of all other partners.
Sharing of profits: The profits must be distributed among the partners in an agreed ratio. Similarly, losses should be shared among the partners.
Lawful Business: The business carried on by the partners must be lawful. Illegal acts such as theft, dacoity, smuggling, etc., cannot be called partnerships.
Utmost good faith: A partner must observe utmost good faith in all dealings with his co-partners. He must render true accounts and make no secret profits from the business.
Are non-current assets fixed assets?
Yes, non-current assets are also known as fixed assets. These are long-term assets that are not intended for sale but are used by a company in its business operations. Examples of non-current assets include property, plant, and equipment, as well as intangible assets like patents and trademarks. TheRead more
Yes, non-current assets are also known as fixed assets. These are long-term assets that are not intended for sale but are used by a company in its business operations.
Examples of non-current assets include property, plant, and equipment, as well as intangible assets like patents and trademarks. These assets are recorded on a company’s balance sheet and are reported at their historical cost or at their fair market value, depending on the type of asset.
See lessWhat is a non-current asset?
Generally, Assets are classified into two types. Non-Current Assets Current Assets Non-Current Asset Noncurrent assets are also known as Fixed assets. These assets are an organization's long-term investments that are not easily converted to cash or are not expected to become cash within an acRead more
Generally, Assets are classified into two types.
Non-Current Asset
Noncurrent assets are also known as Fixed assets. These assets are an organization’s long-term investments that are not easily converted to cash or are not expected to become cash within an accounting year.
In general terms, In accounting, fixed assets are assets that cannot be converted into cash immediately. They are primarily tangible assets used in production having a useful life of more than one accounting period. Unlike current assets or liquid assets, fixed assets are for the purpose of deriving long-term benefits.
Unlike other assets, fixed assets are written off differently as they provide long-term income. They are also called “long-lived assets” or “Property Plant & Equipment”.
Examples of Fixed Assets
Valuation of Fixed asset
fixed assets are recorded at their net book value, which is the difference between the “historical cost of the asset” and “accumulated depreciation”.
“Net book value = Historical cost of the asset – Accumulated depreciation”
Example:
Hasley Co. purchases Furniture for their company at a price of 1,00,000. The Furniture has a constant depreciation of 10,000 per year. So, after 5 years, the net book value of the computer will be recorded as
1,00,000 – (5 x 10,000) = 50,000.
Therefore, the furniture value should be shown as 50,000 on the balance sheet.
Presentation in the Balance Sheet
Both current assets and non-current assets are shown on the asset side(Right side) of the balance sheet.
Difference between Current Asset and Non-Current Asset
Current assets are the resources held for a short period of time and are mainly used for trading purposes whereas Fixed assets are assets that last for a long time and are acquired for continuous use by an entity.
The purpose to spend on fixed assets is to generate income over the long term and the purpose of the current assets is to spend on fixed assets to generate income over the long term.
At the time of the sale of fixed assets, there is a capital gain or capital loss but at the time of the sale of current assets, there is an operating gain or operating loss.
The main difference between the fixed asset and current asset is, although both are shown in the balance sheet fixed assets are depreciated every year and it is valued by (the cost of the asset – depreciation) and current asset is valued as per their current market value or cost value, whichever is lower.
See lessWhat are some examples of non-current assets?
Non-current assets are long-term investments that are not easily converted into cash within an accounting year. They are required for the long term in the business. They have a useful life of more than an accounting year. Non-current assets can be fixed assets and intangible assets. Fixed assets areRead more
Non-current assets are long-term investments that are not easily converted into cash within an accounting year. They are required for the long term in the business. They have a useful life of more than an accounting year.
Non-current assets can be fixed assets and intangible assets. Fixed assets are tangible assets that can be seen and touched. Whereas, intangible assets are those assets that can not be seen and touched.
You can correlate examples of Non-Current Assets with tangible and intangible assets as mentioned below:
Land and building – They are fixed assets that will give long-term benefits and will be classified as noncurrent assets.
Plant and Machinery – They are tangible assets will give future benefits and are thus mentioned under noncurrent assets.
Office Equipment – They are tangible assets that will give future economic benefits to the company, and comes under noncurrent assets.
Vehicles – They are tangible assets that will give long-term benefits, and will be classified as noncurrent assets.
Furniture – They are also tangible assets that will give future benefits and are classified as non-current assets.
Trademarks – These are intangible assets that will not be easily converted into cash and will be classified as noncurrent assets.
Goodwill – They are intangible assets that can’t be easily converted into cash, and are classified as non-current assets.
Patents – They are intangible assets that will not be converted into cash within an accounting period, and are classified as non-current assets.
Copyrights – They are intangible assets that will not be converted into cash within an accounting period, and are classified as non-current assets.
Long-term Investments – They are long-term investments that will not be easily converted into cash within an accounting period and are classified as non-current assets.
Non-current Assets = Total Liabilities – Current Assets
Current Assets are the assets that will be converted into cash within an accounting year. They include cash, bank, debtors, etc.
BALANCE SHEET
See lessWhat is shareholder’s equity?
Shareholder's Equity Meaning - Shareholder's Equity is the amount invested into the Company. It represents the Net worth of the Company. It is also where the owners have the claim on the Assets after the Debts are settled. It Calculation of Shareholder's Equity Method 1 Shareholder's Equity = TotalRead more
Shareholder’s Equity
Meaning – Shareholder’s Equity is the amount invested into the Company. It represents the Net worth of the Company. It is also where the owners have the claim on the Assets after the Debts are settled. It
Calculation of Shareholder’s Equity
Method 1
Shareholder’s Equity = Total Assets – Total Liabilities
Method 2
Shareholder’s Equity = Share Capital + Retained Earnings – Treasury Stock/Treasury Shares
Components of the Shareholder’s Equity
From the above Method 1, it can be understood that shareholder’s equity comprises of
Net Assets = Current Assets + Non-current Assets, reduced by
Net liabilities = Current liabilities + Long-term liabilities
where Long-term liabilities = Long-term debts + Deferred long-term liabilities + Other liabilities
Also from the method 2,
Share Capital = Outstanding shares + Additional Paid-up share capital
Retained Earnings are the sum of the company’s earnings after paying the dividends
Treasury stocks = Shares repurchased by the company
Example of Shareholder’s Equity
The shareholder’s Equity is represented in the Balance Sheet as below;
See lessWhat is straight line depreciation journal entry?
Straight Line Depreciation Journal Entry Straight-line depreciation refers to the diminishing value of assets over the life of the asset. In other words, the cost of the asset spreads evenly over the useful life of the assets. The salvage value or Residual value of an asset means the estimated valueRead more
Straight Line Depreciation Journal Entry
Straight-line depreciation refers to the diminishing value of assets over the life of the asset. In other words, the cost of the asset spreads evenly over the useful life of the assets.
The salvage value or Residual value of an asset means the estimated value of the asset at the end of its useful life.
The depreciation can also be charged with another method like Written Down Value (WDV) Method.
Formula
Depreciation per annum = ( Cost of asset – Salvage Value) / Useful Life
The journal entry for the depreciation is:
JOURNAL ENTRIES
Now let us understand this with an example, suppose XYZ Ltd. has an asset of value 90,000 with a useful life of 3 years. The company uses the straight-line method of depreciation to depreciate the asset in its book.
So, the depreciation per annum would be calculated as:-
= 90,000/3
= 30,000
In Year 1, the depreciation will be charged as 30,000 for this year. It will be debited to the depreciation account and credited to the asset account. Thus, the value of the asset at the end of year 1 will be 60,000 (90,000-30,000).
JOURNAL ENTRIES
In Year 2, the depreciation will be charged as 30,000. The entry would be the same as the previous year. The value of the asset at the end of year 2 will be 30,000 (60,000-30,000).
At last in Year 3, the depreciation will be charged 30,000. The entry would be the same. The value of the asset at the end of year 3 will be Nil (30,000- 30,000).
JOURNAL ENTRIES
CR
The depreciation will be charged to the profit and loss account for the year as it is an expense for the company.
The entries will be posted into depreciation account as mentioned:
See lessWhat is vehicle depreciation journal entry?
When the Accumulated depreciation account is not maintained, the journal entry for vehicle depreciation shall be Particulars Debit Credit Depreciation a/c Dr. (xxx) To Vehicle a/c (xxx) (Being DepreciationRead more
When the Accumulated depreciation account is not maintained, the journal entry for vehicle depreciation shall be
For example, let us assume that a vehicle (Bike) was purchased on 1st April 2019 with INR. 2,50,000, the rate of depreciation is 15% and also the Company follows the straight-line method of calculating depreciation.
Then the journal entries shall be,
The depreciation charge for the 1st Year
The depreciation charge for the 2nd Year
The depreciation charge for the 3rd Year
The respective ledger accounts for all three years are given below:
When the Accumulated depreciation account is maintained, the journal entry for vehicle depreciation shall be
Taking the above said example,
The depreciation charge for the 1st Year
The depreciation charge for the 2nd Year
The depreciation charge for the 3rd Year
The respective ledger accounts for all three years are given below:
See lessWhat are essential characteristics of a partnership firm?
Partnership Firm Persons who have entered into a partnership with one another to carry on a business are individually called “Partners“; collectively called a “Partnership Firm”; and the name under which their business is carried on is called the “Firm Name” In simple words, A partnership is an agreRead more
Partnership Firm
Persons who have entered into a partnership with one another to carry on a business are individually called “Partners“; collectively called a “Partnership Firm”; and the name under which their business is carried on is called the “Firm Name”
In simple words, A partnership is an agreement between two or more people who comes together to run a business on a partnership deed, which is called a Partnership firm. A Partnership Deed is a written agreement between partners who are willing to form a Partnership Firm. It is also called a Partnership Agreement.
It has no separate legal entity which cannot be separated from the members. It is merely a collective name given to the individuals composing it. This means, a partnership firm cannot hold property in its name, and neither it can sue nor be sued by others.
Contents of a Partnership Deed
A Partnership Deed shall mainly include the following contents:
Types of Partners
The following are the various types o partners
Types of Partnership Firms
There are four types of partnership which are as below.
Essential characteristics of a partnership firm
See less