Owners often ask why the market value of the asset is not included in the balance sheet. This is because we traditionally reluctant to accept market value as a basis for asset measurement in bookkeeping and accounting trades. Although assets, such as cash or assets, are usually measured based on their value, most other assets are measured at cost. This is because it is difficult to check the predictions on which the general value system is based.
For example, if you would buy a building today at a certain cost, is it likely that your value will increase or decrease over time? The answer may depend on some unknown; such as changes in the property market, location, and location. As a result, the balance does not reflect the value of the company's assets; shows how much the company invested in it.
The cost of an asset is the sum of all the costs the company acquired. This amount is not always easy to measure. For example, if a company has built a special purpose machine for manufacturing other products in its own factories and the project has requested logistical support from all parts of the manufacturing organization, from procurement to quality control, then a good judgment transaction should be reflected in the estimate that the cost of these logistics activities how much should be saved (ie placed in the balance) as part of the cost of the machine.
Most commonly, the definition is used to identify the total cost of the components, which serves as a useful tool for a device. The computer is not very useful with no monitor; the keyboard and the operating system, so the cost of each item would cost the computer. In summary, a fixed asset (a purchased item with a life expectancy of more than one year) is the actual cost plus all the costs that the asset will use.
Source by sbobet