Question

Assume that you are the accountant at a fabricating plant. One of the vice presidents has asked you why one of the pieces of equipment used in the plant is shown at its original cost in the asset accounts. Respond to the question.

Answer 1

Generally all the assets are shown in books in original cost. The depreciation charged on the asset is shown under accumulated depreciation. Generally all assets are depreciated based on straight line method or written down value method.

A sample table of how asset will be shown in fixed asset table is given below

All plant and machinery are depreciable asset, and cannot be carried in fixed asset without depreciation. Hence in the given examples the vice president would have seen the original cost table instead of current book value.