Plant assets are reported within the property, plant, and equipment line item on the reporting entity’s balance sheet, where it is grouped within the long-term assets section. The presentation may pair the line item with accumulated depreciation, which offsets the reported amount of the asset. In this article, we’ve explained the concept of plant assets in very detail. We hope you’ll know the difference between plant assets and other non-current assets and the accounting treatment. The second method of deprecation is the declining balance method or written down value method. Every year, the percentage is applied to the remaining value of the asset to find depreciation expense.
This includes purchase price, shipping costs, installation charges and any other costs directly attributable to bringing the asset to its working condition. Plant assets are initially recorded at cost plus all expenditures necessary to buy and prepare the asset for HVAC Bookkeeping its intended use. Plant assets are deprecated over their useful lives using the straight line or double declining depreciation methods. If required, the business or the asset owner has to book the impairment loss. Now let’s consider how asset lifespan and revenue potential play into managing plant resources effectively.. This helps both sides—the giver gets a tax write-off and the receiver gains valuable tools without cost.
Did you know plant assets are more than just heavy equipment or sprawling facilities? They’re pivotal players in your financial statements and can significantly influence your balance sheet health. Its accounting definition could be identified in IAS 16 Property, Plant and Equipment.
Fixed equipment is part of the physical structure, like heating systems or fire sprinklers. The acquisition cost of a plant asset includes not just the purchase price but also any additional expenses necessary to make the asset ready for use. This can include installation, transportation, retained earnings legal fees, and other related costs.
A plant is a physical object that can be used to produce a product or service. A construction company might use units of production for heavy machinery wear and tear, while an office may apply straight-line for desk computers. Over time, buildings age and may lose value—a process called depreciation—which accountants spread across the years of use. Plant assets are a part of non-current assets and are usually the largest group of assets one can find in the financial statements. Companies manage their plant assets by keeping track of them, making repairs when needed, and replacing them at the right time.