Properties, plant, and equipment in accounting theory Essay

Properties, plant, and equipment in accounting theory - Essay Example2) Group be (recording the cost as 800,000 for all the equipment together) modifys the costing of the equipment in two ways. First, it is challenging to depreciate the items because they have different depreciation rates (Liapis & Christodoulopoulou, 2011). However, this risk whitethorn be eliminated in side their depreciation rate is the same. Second, it creates a reporting and cost allocation challenge, as the cost accountant backnot allocate costs effectively with group costing. Operational costs on the assets fashion hard to allocate. However, costing the items independently (single costing) will facilitate reporting because roughly of the equipment should be capitalized (fixed assets) while some would be expensed (inventory).3) Group costing reduces the simoleons of the business. First, it increases the depreciation expense, which has a negative effect on the profit of the business. Group costing also e liminates gain on sale of the expenses assets (Herrmann, Thomas & Saudagaran, 2011). Introduction of unwarranted depreciation also affects the value of the assets as it lowers the item values in the end. However, single costing does not affect the value of the assets and maintains the profit of the business high, as the gains on sale are included in gross sales while the depreciation expense is removed.4) The first problem imminent from the transaction is the possibility of divalent costing. In case the items are recorded as lump sum amount means that in case some of them are sold, they may be recorded again in sales without expensing them creating a double accounting problem (Weiss, 2012). Depreciation problem may also arise from the transactions. An accountant will bring out challenges in treatment of depreciation for the difference between the market value and purchase price. From the transaction, taxation challenges can also arise. When the transaction is taxed, the amount to be taxed may challenge the accountant. The