Important Features of an Asset
The of import features of an asset are depicted inwards the next image.
The 6 of import features of an property are briefly listed equally follows:
- Asset has a toll or value inwards the market.
- It must generate merely about revenue.
- It has maintenance or repair cost.
- It undergoes depreciation over a stream of time.
- It has an estimated useful life span.
- It too has a chip value.
Now let's hash out each of import characteristic of an property 1 past times one.
1. Price or Value
An property unremarkably has a toll or value inwards the market. Such price, i.e. value of an property may locomote either paid or is to locomote payable.
Based on toll or value the property tin locomote classified equally follows:
- Owned asset is that property whose toll or value is already paid.
- Loaned assets is that property whose toll or value is to locomote payable.
The payments made for the loaned assets are unremarkably known equally EMI i.e. Equated Monthly Installments.
2. Generate Revenue
An property must accept a capacity or potential to generate revenue.
For example, an property such equally a institute amongst modern machineries tin locomote used effectively to growth the production of goods. The organization shall ever endeavor to reach the installed capacity of such an property inwards the production of goods. This volition convey higher revenue to the organization.
3. Maintenance Cost
An property unremarkably has a maintenance or repair cost.
Maintenance done ofttimes helps to avoid the irregular standstills inwards the business operations which if non done timely tin outcome inwards loss of revenue to the organization.
The maintenance cost occurs due to urgent repair requirements together with regular sessions of AMC (Annual Maintenance Contract). This cost must locomote absorbed (sustained) to proceed the property role smoothly.
4. Depreciation of an asset
An property unremarkably undergoes depreciation over a stream of time.
Depreciation is the distribution of the full cost of the property over the useful life of the asset.
Another advert of Depreciation is Amortization.
The depreciation (amortization) is calculated on the purchase value of a fixed property because of reasons equally follows:
- The property was used over time.
- Certain total of fourth dimension has passed since its purchase.
- The property is non longer inwards its master copy novel patch together with has to merely about extend degraded due to vesture together with tear, environmental factors, storage, etc.
The depreciation which an property has undergone inwards a twelvemonth (annum) tin locomote calculated using formula shown inwards the next image.
Note: click on the higher upwards icon to teach its zoomed preview inwards your browser.
5. Estimated Useful Life
An property unremarkably has an estimated useful life. It is an approximate life bridge of an property to bear out together with perform diverse operations together with tasks for which it is designed or made. It is by together with large measured inwards years.
The seller (vendor) ever communicates the estimated useful life of an property to its purchaser. The purchaser tin locomote either an private or organization. This communication is done at the fourth dimension of sale of the asset.
If the estimation of useful life is impossible to ascertain past times the vendor, or when a buyer disagrees amongst the seller, hence suggest of an skillful (recognised qualified professional) is considered to derive such estimation.
6. Scrap Value
As an property is used over fourth dimension to perform diverse functions, it starts losing its trounce life. That is, its estimated useful life gradually starts falling. After its life ends, it is no longer capable of performing tasks, operations or functions for which it was originally designed. It becomes a scarp but yet holds merely about value inwards it. This in conclusion remaining value of a dead property is called a Scarp Value.
Scrap value is inwards the nature of cash receipt to the possessor of a dead asset.
The chip value generated is too a source of indirect (not regular) income of the business.
Conclusion on Asset Evaluation
Based on higher upwards discussion, nosotros tin conclude that of import features of an property must locomote considered spell evaluating an asset.
With this understanding, an property must locomote evaluated during:
- Its acquisition or purchase.
- While it is beingness used or is nether operation.
- At the fourth dimension of its realization or sale.
However, such an evaluation must locomote analysed together with reviewed properly together with promptly nether the professional person guidance of experts.
