Important Features of an Asset
The of import features of an blogspot.com//search?q=what-is-asset-meaning-definition">asset are depicted inward the next image.
The half dozen of import features of an property are briefly listed every bit follows:
- Asset has a cost or value inward the market.
- It must generate approximately revenue.
- It has maintenance or repair cost.
- It undergoes depreciation over a catamenia of time.
- It has an estimated useful life span.
- It likewise has a chip value.
Now let's beak over each of import characteristic of an property ane past times one.
1. Price or Value
An property commonly has a cost or value inward the blogspot.com//search?q=what-is-asset-meaning-definition">market. Such price, i.e. value of an property may survive either paid or is to survive payable.
Based on cost or value the property tin survive classified every bit follows:
- Owned asset is that property whose cost or value is already paid.
- Loaned assets is that property whose cost or value is to survive payable.
The payments made for the loaned assets are commonly known every bit EMI i.e. Equated Monthly Installments.
2. Generate Revenue
An property must choose a capacity or potential to generate revenue.
For example, an property such every bit a constitute alongside modern machineries tin survive used effectively to increase the blogspot.com//search?q=what-is-asset-meaning-definition">production of goods. The blogspot.com//search?q=what-is-asset-meaning-definition">organization shall ever endeavor to accomplish the installed capacity of such an property inward the production of goods. This volition convey higher revenue to the organization.
3. Maintenance Cost
An property commonly has a maintenance or repair cost.
Maintenance done often helps to avoid the irregular standstills inward the blogspot.com//search?q=what-is-asset-meaning-definition">business operations which if non done timely tin outcome inward loss of revenue to the organization.
The maintenance cost occurs due to urgent repair requirements as well as regular sessions of AMC (Annual Maintenance Contract). This cost must survive absorbed (sustained) to proceed the property component smoothly.
4. Depreciation of an asset
An property commonly undergoes depreciation over a catamenia of time.
Depreciation is the distribution of the full cost of the property over the useful life of the asset.
Another cite of Depreciation is Amortization.
The depreciation (amortization) is calculated on the purchase value of a fixed property because of reasons every bit follows:
- The property was used over time.
- Certain total of fourth dimension has passed since its purchase.
- The property is non longer inward its master copy novel acre as well as has to approximately extend degraded due to vesture as well as tear, environmental factors, storage, etc.
The depreciation which an property has undergone inward a twelvemonth (annum) tin survive calculated using formula shown inward the next image.
Note: click on the higher upwards icon to instruct its zoomed preview inward your browser.
5. Estimated Useful Life
An property commonly has an estimated useful life. It is an approximate life bridge of an property to acquit out as well as perform diverse operations as well as tasks for which it is designed or made. It is to a greater extent than often than non measured inward years.
The seller (vendor) ever communicates the estimated useful life of an property to its purchaser. The purchaser tin survive either an private or organization. This communication is done at the fourth dimension of sale of the asset.
If the estimation of useful life is impossible to ascertain past times the vendor, or when a buyer disagrees alongside the seller, as well as hence suggest of an practiced (recognised qualified professional) is considered to derive such estimation.
6. Scrap Value
As an property is used over fourth dimension to perform diverse functions, it starts losing its vanquish life. That is, its estimated useful life gradually starts falling. After its life ends, it is no longer capable of performing tasks, operations or functions for which it was originally designed. It becomes a scarp precisely nevertheless holds approximately value inward it. This in conclusion remaining value of a dead property is called a Scarp Value.
Scrap value is inward the nature of blogspot.com//search?q=what-is-asset-meaning-definition">cash receipt to the possessor of a dead asset.
The chip value generated is likewise a source of indirect (not regular) income of the business.
Conclusion on Asset Evaluation
Based on higher upwards discussion, nosotros tin conclude that of import features of an property must survive considered piece evaluating an asset.
With this understanding, an property must survive evaluated during:
- Its acquisition or purchase.
- While it is beingness used or is nether operation.
- At the fourth dimension of its realization or sale.
However, such an evaluation must survive analysed as well as reviewed properly as well as promptly nether the professional person guidance of experts.
