ELEMENT 1
DEVELOP PRACTICES FOR SYSTEMATIC MAINTENANCE, REPAIR, AND PURCHASE OF PHYSICAL ASSESTS
TEST YOUR KNOWLEDGE
1. What are fiee aaaetas? Liat four typea of aaaeta uaee in your workplace.
Fixed assets are long-term tangible pieces of property that a frm owns and uses in the producton of its
income and are not expected to be consumed or converted into cash any sooner than at least one year’s
tme.
4 types of assets used in my workplace:
a. Fixed Assets (delivery truck, van, etc.)
b. Tangible Assets (building, land, etc.)
c. Intangible Assets (corporate intellectual property such as trademark and copyrights, goodwill, brand
recogniton, etc.)
d. Current Assets (cash, accounts receivable, liquid assets, etc.)
2. What ia eepreciations? Briefy eiplain atraight-line eepreciation methoe with eiample.
Depreciaton is the systematc reducton in the recorded cost of a fxed asset.
Straight-line depreciaton is considered to be the most common method of depreciatng assets. The
computaton of the amount of annual depreciaton expense using the straight-line method requires two
numbers: the inital cost of the asset and its estmated useful life.
For example, you purchase a van for $18,000 and expect it to have use in your business for ten years.
Using the straight-line method, you would divide the inital cost of the van by its useful life.
The $1,800 becomes a depreciaton expense that is reported on your income statement under operaton
expenses at the end of each year.
DEVELOP PRACTICES FOR SYSTEMATIC MAINTENANCE, REPAIR, AND PURCHASE OF PHYSICAL ASSESTS
TEST YOUR KNOWLEDGE
1. What are fiee aaaetas? Liat four typea of aaaeta uaee in your workplace.
Fixed assets are long-term tangible pieces of property that a frm owns and uses in the producton of its
income and are not expected to be consumed or converted into cash any sooner than at least one year’s
tme.
4 types of assets used in my workplace:
a. Fixed Assets (delivery truck, van, etc.)
b. Tangible Assets (building, land, etc.)
c. Intangible Assets (corporate intellectual property such as trademark and copyrights, goodwill, brand
recogniton, etc.)
d. Current Assets (cash, accounts receivable, liquid assets, etc.)
2. What ia eepreciations? Briefy eiplain atraight-line eepreciation methoe with eiample.
Depreciaton is the systematc reducton in the recorded cost of a fxed asset.
Straight-line depreciaton is considered to be the most common method of depreciatng assets. The
computaton of the amount of annual depreciaton expense using the straight-line method requires two
numbers: the inital cost of the asset and its estmated useful life.
For example, you purchase a van for $18,000 and expect it to have use in your business for ten years.
Using the straight-line method, you would divide the inital cost of the van by its useful life.
The $1,800 becomes a depreciaton expense that is reported on your income statement under operaton
expenses at the end of each year.
