Question

2. What does the account Property, Plant, and Equipment represent? What is the business transaction that increases this account? What is (are) the business transaction(s) that decreases this asset?

Answer 1

Answer: The account Property, Plant and Equipment represents the fixed assets such as Building, machineries, furniture and fixtures, vehicles, that the entity owns for the smooth conduct of business operations. The purchase of these assets is covered in capital expenditure or capex and it includes items that have life more than a year and entity might hold them for long term.

The business transactions that increases this account are purchase of Fixed assets whether in exchange of equity or in case of merger with another entity, repairs that enhances the performance of plants and equipment.

The business transactions that decreases this asset are Depreciation that is reduced from the value due to application of time and account for wear and tear of the fixed assets, sale of Fixed assets.