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ACCOUNTING STANDARD

“ ACCOUNTING IS A LANGUAGE OF BUSINESS”

INTRODUCTION OF ACCOUNTING STANDARD

• Wider Concept• Issued By ICAI On 27th

August 2007• Quick Decision Making• Applied To All Commercial,

Business, Industrial Activities.

ACCOUNTING STANDARD -10

FOR FIXED ASSETS

INTRODUCTION OF AS- 10

• Issued In November, 1985• Fixed Assets Are Long Lived Assets• Improved Accounting For An Item Of

Asset• Capital Expenditure

DEFINITION

• FIXED ASSET• FAIR MARKET VALUE• GROSS BOOK VALUE

IMPORTANCE OF AS-10• Used Relatively Longer Period• Essential To Make Profit• Maintenance of Fixed Assets• To Survive In Market

WHY ICAI ISSUE AS - 10BEFORE AFTER

Do Not Disclose About Their Assets, Rate Of Depreciation

Disclose All Assets, Rate Of Depreciation

Disclose Only Their Profit And Loss A/C And Balance Sheet

Disclose All Reports Of Their Enterprises

Government Also Interested In Their Revenue Means Taxes

Government Knows All Tangible And Intangible Assets Of Enterprises

Find Difficult For Investor Easy For Investor To Invest In Enterprise By Seeing All Reports

APPLICABILITY OF AS – 10 COMPULSORY FROM 1ST APRIL, 1993

LEVEL 1

LEVEL 2

LEVEL 3

NON APPLICABILITY OF AS - 10• REGENERATIVE

NATURAL RESOURCES• WASTING ASSET• REAL ESTATE

DEVELOPMENT• LIVE STOCK

FIXED ASSETS

• PLANT & MACHINERY

• FURNITURE & FITTINGS

• LAND & BUILDING

INTANGIBLE ASSETS

GOODWILL INTELLECTUAL PROPERTY

PATENTS KNOW- HOW

INTANGIBLE ASSETS

WHAT IS THE USEFUL LIFE OF A FIXED ASSET

• PHYSICAL LIFE• ECONOMIC

LIFE

STEPS TO DETERMINE THE COST OF FIXED ASSET

• ESTIMATE THE RESIDUAL COST OF FIXED ASSET• USE DEPRECIATION OR AMMORTIZATION• REPORT IN BALANCE SHEET UNDER CATEGORY OF

“FIXED ASSETS”

FIXED ASSETS TURNOVER RATIO

• DEPENDENT ON LINE OF BUSINESS, NATURE OF BUSINESS, ETC.

• FIXED ASSET TURNOVER RATIO = NET SALES AVERAGE FIXED ASSET

DISCLOSURE IN BALANCE SHEET

• GROSS AND NET BOOK VALUE• EXPENDITURE ON FIXED ASSET• REVALUED AMOUNT AND METHOD

OF CALCULATING IT• RATE OF DEPRECIATION

ILLUSTRATION- 1 ON USEFUL LIFE OF ASSET

• XYZ Ltd expects that a plant become useless. The gross.100 lakh. The company charges SLM depreciation over a period of 10 years and estimated scrap value is 3%. At the end of 7th year the plant net realizable value is 31,10,000

• Find out the profit/ loss on retirement of asset

SOLUTIONPARTICULARS AMOUNT

Historical cost Rs. 100 lakhs

Estimated realizable value Rs. 3 lakhs

Depreciation amount Rs.97 lakhs

Life (years) 10

Depreciation per year Rs.9.7 lakhs

No. of assets for which asset is depreciated

7 years

Total depreciation (9.7x 7) Rs.67.90 lakhs

Net realizable value Rs.31. 10 lakhs

Net book value Rs.32.10 lakhs

loss Rs.1 lakh

EXAMPLESTATA MOTORS Ltd

INDIAN 0IL CORPORATION

EXAMPLES