The Sage Course Companion on Financial Accounting is an accessible introduction to the subject that will help readers to master key concepts and enhance their thinking skills in line with course requirements. It provides support on how to revise for exams and prepare for and write assessed pieces.

Fixed Assets and Depreciation

Fixed assets and depreciation


The fixed assets of a business will usually be purchased in one accounting period but will normally last for many future years. These fixed assets, consisting of items such as buildings, computers, plant and machinery, etc. will be used in the business to generate future earnings for many years, and in the case of buildings, perhaps for many decades. Legally and also in accordance with accounting standards, the cost of an asset must be allocated over the period of time expected to benefit from its use. The UK accounting standard FRS 15, Tangible Fixed Assets, states that the fundamental objective of depreciation is to reflect in the operating profit the cost of using tangible fixed assets. In other words, ...

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