Non Current Assets and Related Liabilities

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Non Current Assets and Related Liabilities
In accounting context, assets are the property or estate which can be transformed…

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Non Current Assets and Related Liabilities

Non Current Assets and Related Liabilities

ACCT 212 Discussions Week 5 All Students Posts – 69 Pages 

Students are encouraged to use online collaboration tools to create a submission 2-4 minutes in length, discussing your research into the relevance of the company’s Fixed Assets (PP&E) to their core business, and how Fixed Assets (PP&E) help the company in its business.

In this post, you’ll provide researched, APA sourced citations on how companies report their Fixed Assets (PP&E), and you’ll discuss what this information means to the business.

The points given below are substantial, so far as the difference between assets and liabilities is concerned:

  1. In accounting context, assets are the property or estate which can be transformed into cash in the future, whereas liabilities are the debt which is to be settled in the future.
  2. Assets refer to the financial resources, which provide future economic benefit. Conversely, liabilities are those financial obligations, which requires being paid off in the near future.
  3. Assets are depreciable objects, i.e. every year a certain percentage or amount is deducted as depreciation. As against this, liabilities are non-depreciable.
  4. In the balance sheet, assets are shown on the right side, while liabilities are placed at the left. Further, the total of assets and total of liabilities should tally.
  5. Assets are classified as current and non-current assets. On the other hand, Liabilities are classified as current and non-current liabilities.
  6. Examples of assets – Trade Receivables, Building, Inventory, Patent, Furniture, etc., and Example of liabilities- Trade Payable, Debentures, Bank Loan, Overdraft, etc.

PP&E plays a key part in the financial planning and analysis Links to an external site of a company’s operations and future expenditures, especially with regards to capital expenditures. Property, Plant, and Equipment (PP&E) is a non-current, tangible capital asset is for business and used to generate revenues and profits.

Formula: Net PP&E = Gross PP&E + Capital Expenditures – Accumulated Depreciation

For example: In May 2017, Factory Corp. owned PP&E machinery with a gross value of $5,000,000. Accumulated depreciation for the same machinery was at $2,100,000. Due to the wear and tear of the machinery, the company decided to purchase another $1,000,000 in new equipment. For this period, the depreciation expense for all old and new equipment is $150,000.

The PP&E account is often denoted as net of accumulated depreciation. This means that if a company does not purchase additional new equipment (therefore, its capital expenditures are zero), then Net PP&E should slowly decrease in value every year due to depreciation to an external site.  This can be better determined by a depreciation schedule.  PP&E is a tangible fixed-asset account item and is generally very illiquid. A company can sell its equipment, but not as easily as it can sell its or investments such as bonds or stock shares. The value of PP&E between companies will vary with the operations. For example, a construction company will generally have a significantly higher property, plant, and equipment balance than an accounting firm does…