Accounting for fixed assets
Explain how should the changing value of a fixed asset be reflected in a company accounts?
The benefits which a business obtains with a fixed asset extend over many years. Like an example, a company must use the same piece of production machinery for several years, while a company owned motor car used by salesman probably has a shorter useful life.
By accepting that the life of a fixed asset is limited and the accounts of a business need to recognize the benefits of the fixed asset as it is consumed over several years and consumption of a fixed asset is known to as depreciation.