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27 cost of equipment cost of equipment the term

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Cost of equipmentCost of equipmentThe termequipmentin accounting includes office equipment, store equipment, factoryThe termequipmentin accounting includes office equipment, store equipment, factoryequipment, delivery equipment, machinery, furnitures and fixtures, and similar fixed assets.equipment, delivery equipment, machinery, furnitures and fixtures, and similar fixed assets.The cost of such assets includes the invoice (purchase) price, transportation and handlingThe cost of such assets includes the invoice (purchase) price, transportation and handlingcharges, insurance on the equipment while in transit, assembling and installation costs, andcharges, insurance on the equipment while in transit, assembling and installation costs, andcosts of conducting trail runs. As indicated earlier, all costs of getting an asset ready for itscosts of conducting trail runs. As indicated earlier, all costs of getting an asset ready for itsintended use are costs of that asset.intended use are costs of that asset.2.4 NATURE AND MEANING OF DEPRECIATIONAs plant assets are used in the operations of a business, their value to provide serviceAs plant assets are used in the operations of a business, their value to provide servicedecreases through usage and the passage of time.decreases through usage and the passage of time.This cost allocation of plant asset, calledThis cost allocation of plant asset, calleddepreciationdepreciation, is recorded in the accounting books, is recorded in the accounting booksperiodically.periodically.Depreciation is frequently misunderstood. The term depreciation, as used in accounting, doesDepreciation is frequently misunderstood. The term depreciation, as used in accounting, doesnot refer to the physical deterioration of an asset or the decrease innot refer to the physical deterioration of an asset or the decrease inmarket valuemarket valueof assetof assetovertime.overtime.Depreciation means the allocation of the cost of a plant asset to the periods that benefit fromDepreciation means the allocation of the cost of a plant asset to the periods that benefit fromthe services of the asset.the services of the asset.The term depreciation is used to describe the gradual conversion of the cost of the asset intoThe term depreciation is used to describe the gradual conversion of the cost of the asset intoan expense.an expense.Depreciation is not a process ofDepreciation is not a process ofvaluationvaluation. Ac counting records are kept in accordance with. Ac counting records are kept in accordance withthe cost principle; they are not indicators of changing price levels. It is possible that, throughthe cost principle; they are not indicators of changing price levels. It is possible that, throughan advantageous buy and specific market conditions the market value of a building may rise.an advantageous buy and specific market conditions the market value of a building may rise.

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Term
Summer
Professor
Balaramakrishna

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