Question

Assets such as receivables, inventory, and property, plant, and equipment are the key resources used to help an organization generate revenue. Select a specific asset within these three types and discuss how a company can use this to generate revenue.

further explanation

select one of the asset accounts in the discussion topic. Provide an illustration/example of a transaction that would occur from the organization generating revenue. Clearly describe an example and reflect both the debit and credit entries one would record. Then, explain how those entries (both the debit and the credit) affect the income statement and the balance sheet. Then describe how the transaction generates revenue for the company.

First, provide a description of each of the accounts noted in the topic and explain what each one represents. Second, provide the illustration/example, and third, explain how it represents the generation of revenue. 2-3 paragraphs, minimum of 2 citations

Answer 1

Tangible Assets are held for use in production Or supply of goods and services, for rental to others Or for administrative, purposes expected to be used for more than one period and not held for sale in the normal course of business. An Item of property, plant and equipment should be recognised as an asset if and only if it is probable that future economic benefit associated with the asset will flow to the entity and the cost of an item can be measured reliably.

Company A is into a business of job work of papers. It imports special rewinding and cutting machinery from China for 20,000 doller on 1st April 2019. The use of this machine is to cut long paper sheets into desirable size as demanded from its various customers. This machinery will be recorded as an asset in the books of company A as it meets the recognition criteria as explained earlier for 20,000 doller. If we take the useful life of this machinery as 15 years, depreciation for the rear 2019-20 will be 1333.33 doller. In the statement of Profit and Loss, Depreciation expenses of 1333.33 doller will be debited. In Balance sheet Asset of 20000 doller will be shown with accumulated depreciation of Rs. 1333.33 in year one. Subsiquently this asset will be depreciated over a period of 15 years.

An Item of property, plant and equipment generates revenue for the organisation. In the example above Company A is into paper industry and for Company A a rewinding and cutting machinery is necessity to carry out it's core operations. Capital cost incurred by the company will generate revenue over the period of life of the machinery.