Reaction Paper on Accounting - 1912 Words

Chapter 7 Reflection Paper Financial Accounting Buildings, machinery, equipment, furniture, fixtures, computers, cars and trucks are examples of assets that will last for more than one year, but will not last indefinitely. These are some examples of long-lived non-monetary assets. When these assets were acquired, the company has made an expenditure. If the company will benefit in the curret period, the cost of the goods are expenses. If the benefits are expected in future periods, the costs are assets during the current period and the expenditures are capitalized. The cost of these non-monetary assets should be matched with the revenues that are obtained from its use in the future periods. In general there are two types of long-lived†¦show more content†¦Under any depreciation method, the maximum depreciation during the life of an asset is limited to the cost of the asset. The difference in depreciation methods involves when you will report the depreciation. Its a matter of timing. When property, plant, and equipment are disposed of, their dollar amounts must be removed from the accounts and any other assets received must be recorded. One reason knowledge of the effects of disposals of property, plant, and equipment are important to managers is that such disposals can result in useful resources. Another reason is that such disposals can affect the companys net income. When considering disposing of property, plant, and equipment, managers must consider whether the advantages of obtaining usable resources are enough to offset the possible negative income effects. It is also possible to increase resources through the disposal of property, plant, and equipment. In such cases, resources and sources of resources increase. The increases in sources of resources are called gains and appear on the income statement as part of other revenues and expenses. Some properties and equipments are disposed by trading them in or exchanging them for new assets. If the trade in is similar, its value is assumed to be the net book value. If the asset traded is dissimilar, its value is its estimated fair value. Wasting assets refer to natural resources such as coal, oil or gas.Show MoreRelatedCapital Market Research : How Disclosures Of Particular Information Influences Aggregate Trading Activities Taken By Individuals Participating Within Capital1373 Words   |  6 Pagesinformation content of accounting disclosures and capital market research that uses share price data as a benchmark for evaluating accounting disclosures has evolved. In this area of research, markets are deemed efficient and this theory will be explored further. The capital market is considered to be highly competitive, and as a result, newly released public information is expected to be quickly impounded into share prices. Following Fama’s (1970) landmark research papers, which explained the principalsRead MoreWhy Is Positive Accounting Standards?1162 Words   |  5 Pages1. 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