Accounting for disposals of plant assets and importance
Disposal of plant assets occurs in four steps. First and foremost, it is important to ensure that depreciation is up to date. This is followed by the elimination of old disposed assets and relating them to accumulated depreciation (Rush Trucking, n.d). Thereafter, post all the cash values that are either received or paid out during the disposal of the asset in the cash book. Finally, calculate the sum of gains or losses arising from the asset disposal process (Rush Trucking, n.d). Notably, accounting for the disposal of plant assets is of great importance for the organization since the firm ensures that the assets remain on the accounting book until their disposal time. This implies that the balance sheet will reflect assets that have reached their projected life but still provide services on a timely reporting basis. Therefore, the organization can decide whether to continue using the asset or not with no regards to depreciation figures recorded in the accounting documents.
Accounting for natural resources and intangible assets; and importance
Natural resources are regarded as assets that are provided inherently by nature, the Earth, and are consumed in the business. The units of production formula are used to compute the depletion expenses of the natural resources. Firms use the formula to assess the rates of depletion, which relate to the extents to which their consumption influence their distribution and allocation of their costs. On the other hand, the intangible assets are those that exist in non-physical forms but have a value attached to them due to associated special rights (The Navigator, n.d). Therefore, businesses use amortization to examine the allocation of costs of intangible assets throughout its useful life. This is usually achieved by the use of the straight-line formula. Notably, accounting for natural resources and intangible assets provides the business with the opportunity to determine its privileges and comparative advantages over other similar ventures.
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References
Rush Trucking. (n.d). Chapter 23: Plant Assets and Depreciation. Pp. 668-694. https://christygarrett.weebly.com/uploads/6/5/7/0/6570222/glencoe_accounting_chp23.pdf
The Navigator. (n.d). Chapter 10: Plant Assets, Natural Resources, and Intangible Assets. https://nscpolteksby.ac.id/ebook/files/Ebook/Accounting/Accounting%20Principles/Chapter%2010.pdf
