Property, plant and equipment are a group of assets your company holds that are initially recognized on your balance sheet. Initially they\u2019re measured at cost which we have defined before and that\u2019s that. Or so you might think.\u00a0<\/p>\n
The thing with property, plant and equipment or PPE is that they\u2019re used for a longer period within the process of generating your company benefits. As such, as you might imagine, just keeping them at their original cost within your accounts isn\u2019t exactly what you\u2019d expect from accruals basis of accounting where against revenue there\u2019s an expense and so on. More so, assets tend to live a life of their own in breaking down etc.<\/p>\n
So therefore we need to know how to measure (we call it \u2018measuring\u2019 in accounting) your PPE items after they\u2019ve initially been recognized. As a part of this measuring process there are processes that are happening regularly and things that are more like one-off things. For an example, as we mentioned, with accruals basis of accounting against revenue there ought to be an expense and obviously your assets should be part of it. PPE items therefore are depreciated into expenses over the period they\u2019re used. As they\u2019re used, they are part of creating either revenues or decreasing expenses or some such, so you\u2019re getting benefits from using them and as such you should reflect this usage in the form of showing an expense from them. This is called depreciation. One-off transactions are for occasions when an item becomes obsolete, breaks down and needs repairs or a replacement or simply loses value as in it\u2019s not generating what was expected of it.<\/p>\n
For each of these occasions there are accounting treatments we\u2019ll discuss further later on.<\/p>\n","protected":false},"excerpt":{"rendered":"
Property, plant and equipment are a group of assets your company holds that are initially recognized on your balance sheet. Initially they\u2019re measured at cost which we have defined before and that\u2019s that. Or so you might think.\u00a0<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[55],"tags":[],"class_list":["post-5300","post","type-post","status-publish","format-standard","hentry","category-1-5-3-subsequent-measurement"],"aioseo_notices":[],"_links":{"self":[{"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts\/5300","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/comments?post=5300"}],"version-history":[{"count":1,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts\/5300\/revisions"}],"predecessor-version":[{"id":5301,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts\/5300\/revisions\/5301"}],"wp:attachment":[{"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/media?parent=5300"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/categories?post=5300"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/tags?post=5300"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}