Current and Fixed Assets Essay Example | Topics and Well Written Essays - 750 words

Current and Fixed Assets - Essay Example The exchanging over or turning over of this assets is usually done during the normal business environment. These assets include cash and cash in-equivalents which re the liquid assets. These include currency, deposit accounts and negotiable instruments like money orders and bank drafts. There are also short term investments which include trading securities. Other items are receivable assets, inventory and prepaid expenses (Ingram & Albright, 2006.pp.298). Fixed assets are generally termed as PPE to mean property plant, and equipment. These assets are purchased mainly for long term use. They are used in earning the business profits. These may include land, buildings, machinery, tools, and furniture. They are usually written off against profits in the balance sheet. In management accounting fixed assets are also called capital assets. These assets are attached with monetary value and not the liquid cash like in current assets (Bott, 2005.pp.165). Discussion In a balance sheet there are usually decreases and increases in the assets of the company, both fixed assets and current assets. in the balance sheet an increase in the fixed and current assets is usually debited while a decrease in the two is usually credited. If the asset is capital plus liability then debits are the same as the credits. For double entry to be reflected in the accounts every debit must have a corresponding credit entry. The assets are usually different from liabilities and they take different sides in the balance sheet. To balance an account will simply mean to obtain the difference between the totals of the two sides of an account. If the details of the on the debit side is higher than of the credit side the balance is said to be a debit balance. If the totals on the credit side are higher than of the debit side, the balance is said to be a credit balance (Ingram & Albright, 2006.pp.300). In this company the fixed asset is the file server which is worthy $15,000. This is property of the com pany thus it will be debited. The amount which the company has paid will be credited and the amount that they will get from the same will be credited. What really happens is as shown on the next page: ACCOUNT TO RECORD ENTRY IN ACCOUNT SIDE Asset(fixed and current) An increase Debit Left Asset(fixed and current) A decrease Credit Right The debit side is usually left while the credit is usually one the left side. The $15,000 will therefore be on the left side since it will be an increase in assets of the company. This is a fixed asset because it cannot be converted in quick or liquid cash. The amount which was paid by the company, that is, $5,000 will be a decrease in asset and this will be credited on the right side of the balance sheet. The money which they will get after selling the software packages will be an increase in the company’s current assets and this will be debited on the left side of the balance sheet (Bott, 2005.pp.159). The profits that are got after selling t he software packages will reduce the company’s properties but this will be replaced by the cash that flows in the bank. The two will be written in different sides of the balance sheet. After the property is sold, the value of them will increase since it will bring in addition profits to the company (Ingram & Albright, 2006.pp.291). When there is no change in the assets then the company