For airlines and most of the companies, making the right choice about long-lived assets involves a critical analysis since the assets represent huge investments (Kimmel, Weygandt & Kieso, 2010) . These decisions explain what type of asset to acquire and when, the method to finance the acquisitions, and how to take account of the asset. Some of the arising issues in chapter 9 entail: description of how the cost principle make use to property and equipment, calculation of amortization and explain its concept, lastly description of other accounting issues that are related to amortization.
Various assets such as tangible assets are long-lived resources that have essential physical parts that have definite shape and size used in the business operation, and their intention is not for sale to customers. It is contrary to various current assets used in a current accounting period, but they provide benefit over many years. The cost principle main requirement is the record at the cost of plant and equipment hence the new airplanes purchased at Canada are recorded at cost. An important aspect is determining which cost should be included in and which should not result in a long-lived asset account. Current period benefits from various cost known as operating expenditure while costs benefiting future periods included in a long-lived asset account are capital expenditures.
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Explaining the concept of depreciation is the process of allocation to outlay cost of a plant asset over its useful life rationally and methodically. When describing processes of valuation, depreciation is counted out since it does not result in accumulation of cash. Also, cost minus salvage value divided by the useful life in years give the mathematical formula of straight-line depreciation. There are various methods of evaluating the benefit of a plant asset, principal among them being the gain coming of assets ratio and the turnover ratio.
Reference
Kimmel, P. D., Weygandt, J. J., & Kieso, D. E. (2010). Financial accounting: tools for business decision making . John Wiley & Sons.
