accounting

setso karabo

why non currents assets depreciates

They go bads

Original post by setso karabo

why non currents assets depreciates[because non currents loss value as they are used constantly in the business/quote]

Reply 3

Euapp

Current assets are things you don’t hang onto, they have a short shelf life so you don’t need to spread their cost over several years. For example you have a cake making business. Your delivery van, blender, oven etc will bring value to the business over 5 years. You put the purchase cost in the balance sheet and then pass 20% in the P&L each year to represent the fact that the machine is being used and this is the cost associated with that use. The lemons, sugar, flour etc however are bought to be used in your cakes and won’t be hanging around. The opening stock plus purchases less closing stock will be what you have used in your production of cakes and will pass in the P&L , and the stock left at the end of the financial year when you take a « photo » of the company’s position will be accounted for in current assets.