£1 3 million worth of assets stolen from Wolverhampton recycling plant in ‘extraordinary’ theft

If there is an indication that the carrying amount (ie the historical cost) of a plant asset might have changed, an impairment test would be carried out. Plant assets (other than land) are depreciated over their useful lives and each year’s depreciation is credited to a contra asset account Accumulated Depreciation. Founded in 1993, The Motley Fool is a financial services company dedicated to making the world smarter, happier, and richer.

Current assets versus plant assets

The name plant assets comes from the industrial revolution era where factories and plants were one of the most common businesses. This category of assets is not limited to factory equipment, machinery, and buildings though. Anything that can be used productively to general sales for the company can fall into this category. Plant assets and the related accumulated depreciation are reported on a company’s balance sheet in the noncurrent asset section entitled property, plant and equipment. Accounting rules also require that the plant assets be reviewed for possible impairment losses. Depreciation allocates the cost of a tangible asset over its useful life and accounts for declines in value.

• Many business entities use different depreciation methods for financial reporting and tax purposes.
• If there is an indication that the carrying amount (ie the historical cost) of a plant asset might have changed, an impairment test would be carried out.
• Land is considered to have an unlimited life and is therefore not depreciable.
• Noncurrent assets include intangible assets, such as patents and copyrights.

What is asset? Definition, Explanation, Types, Classification, Formula, and Measurement

The assets on a balance sheet contribute to a company’s overall profitability and worth. Plant assets are frequently among the most useful and financially supportive assets. In actual practice, it is not only difficult but impractical to identify how much of the plant assets have actually been used to produce business revenue. Hence, we will calculate depreciation proportionately based on the useful lives of the plant assets. Do take note that freehold land should not be depreciated since they have indefinite useful lives. As we continue to walk our way down the balance sheet, we come to noncurrent assets, the first and most significant of which is PP&E.

What are plant assets?

• This is especially important later because the depreciation recorded on the buildings affects reported income, while no depreciation is taken on the land.
• Equipment, machinery, buildings, and vehicles, are commonly described as property, plant, and equipment (PP&E).
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• In the balance sheet of the business entity, these assets are recorded under the head of non-current assets as Plant, property, and equipment.

Many business entities use different depreciation methods for financial reporting and tax purposes. Most companies, especially those that run fully in-house and do not rely on other parties for production or processing, require land. Even if a company does not operate on-site or own property, many businesses profit from purchasing land, even if they do not intend to use it until later. Buildings that what are plant assets can be used as a plant asset aren’t limited to offices. Buildings can also contain equipment storage, warehouses for merchandising and sales, or on-site centers that assist employees and staff, especially for bigger companies.

• Plant assets are long-term fixed assets that are utilized to manufacture or sell a company’s products and services.
• When researching companies, the financial statement is a great place to start.
• Current assets are expected to be used within a year or short-term time frame.
• Despite the fact that upgrades might be costly, they are nevertheless regarded an asset to a company since they constitute an additional investment in ensuring the company’s success.
• Usually this cost includes architect’s fees; building permits; payments to contractors; and the cost of digging the foundation.
• Despite the fact that plant assets are still referred to as such, the assets in this category are no longer confined to factory or plant-related resources.

Straight Line Method

The acquisition cost of a plant asset is the amount of cost incurred to acquire and place the asset in operating condition at its proper location. Cost includes all normal, reasonable, and necessary expenditures to obtain the asset and get it ready for use. Acquisition cost also includes the repair and reconditioning costs for used or damaged assets as longs as the item was not damaged after purchase. In the balance sheet of the business entity, these assets are recorded under the head of non-current assets as Plant, property, Certified Public Accountant and equipment.