②PurchaseofLandThecostoflandpurchasedincludescashpriceforpurchase,commissionforreal estateagents,legal feesaccruedtaxespaidbythepurchaser,cost of training, clearing and gradingassessment fee.62025/12/3
6 2025/12/3 ②Purchase of Land ⚫ The cost of land purchased includes cash price for purchase, commission for real estate agents, legal fees, accrued taxes paid by the purchaser, cost of training, clearing and grading assessment fee
③PurchaseofEquipmentThecostofequipmentincludesall expendituresingettingitreadyforuse,suchasinvoicepriceless cashdiscounts,freightandtransportationinsurance,tax,installationcost,testfees2025/12/3
7 2025/12/3 ③Purchase of Equipment ⚫ The cost of equipment includes all expenditures in getting it ready for use, such as invoice price less cash discounts, freight and transportation, insurance, tax, installation cost, test fees
2.DepreciationforFixedAssetsWhat?Itis a process of allocating the cost ofafixed assetoveritsuseful/servicelife.Why?The wear and tear on fixed assets that have longlivesexistsSuchcost allocationisdesignedtoproperly matchexpenseswithrevenues.Scope:Depreciation isrecorded onall fixedassetsexceptland.82025/12/3
8 2025/12/3 2.Depreciation for Fixed Assets ⚫ What? It is a process of allocating the cost of a fixed asset over its useful/service life. ⚫ Why? The wear and tear on fixed assets that have long lives exists. Such cost allocation is designed to properly match expenses with revenues. ⚫ Scope: Depreciation is recorded on all fixed assets except land
How?Several depreciation methodsEffectDepreciationaffectsthebalancesheetthroughaccumulateddepreciation andincome statementthrough depreciation expense92025/12/3
9 2025/12/3 ⚫ How? Several depreciation methods. ⚫ Effect Depreciation affects the balance sheet through accumulated depreciation and income statement through depreciation expense
(1)FactorsDeterminingDepreciation3SalvageValueUsefulEstimateofLifeCostasset'sEstimateofremainingAcquisitiotheexpectedvaluewhenitnservicelifeofisdisposed.costtheasset102025/12/3
10 2025/12/3 (1)Factors Determining Depreciation Cost Useful Life Salvage Value 1 2 3 Estimate of asset’s remaining value when it is disposed. Estimate of the expected service life of the asset Acquisitio n cost