property, plant, and equipment

(noun)

an accounting term for certain fixed assets and property which will be used for a long period of time, such as land, machinery, and factories

Related Terms

  • International Accounting Standard
  • book value

Examples of property, plant, and equipment in the following topics:

  • How Transactions Affect the Balance Sheet

    • The purchase of the land will be recorded by crediting $100,000 in the cash account (a decrease) and debiting $100,000 to the land account -- under property, plant and equipment -- (an increase).
    • When improvements are made to the land, cash will be credited for $20,000 (a decrease), and land improvement -- under property, plant, and equipment -- will be debited (an increase).
    • The construction of the building will result in cash being debited for $500,000 (a decrease) and buildings -- under property, plant and equipment -- being credited (an increase).
    • When improvements are made to the land, cash will be credited for $20,000 (a decrease), and land improvement -- under property, plant, and equipment -- will be debited (an increase).
    • The construction of the building will result in cash being debited for $500,000 (a decrease) and buildings -- under property, plant and equipment -- being credited (an increase).
  • Types of Long-Lived Assets

    • ., buildings and equipment) and intangible assets (e.g. copy rights).
    • Tangible assets include fixed assets, such as buildings and equipment.
    • Fixed assets-- also referred to as property, plant, and equipment-- are purchased for continued and long-term use in generating profit for a business.
    • Property, plant, and equipment are tangible, long-lived assets used in the operations of the business.
    • Land, natural resources, buildings, furniture, equipment, and machinery are included in this category.
  • Reporting Investing Activities

    • An investing activity is anything that has to do with changes in non-current assets -- including property and equipment, and investment of cash into shares of stock, foreign currency, or government bonds -- and return on investment -- including dividends from investment in other entities and gains from sale of non-current assets.
    • In each of these cases, the Cash account would be debited -- due to the increase in cash -- and the account appropriate to the specific investment would be credited -- which could include Operating Assets, Equity Investments, or Debt Investments.
    • In each of these cases, the account appropriate to the specific investment would be debited, and the Cash account would be credited, due to the decrease in cash.
  • How Business Activities Affect the Balance Sheet

    • The result of this activity would be an increase in the property, plant and equipment account and a decrease in the cash account.
    • Shareholders' equity is comprised of issued capital and reserves attributable to equity holders of the parent company (controlling interest) and non-controlling interest in equity.
    • Numbers of shares authorized, issued and fully paid, and issued but not fully paid
    • If a company decides to invest in a new factory, this activity would affect the balance sheet by decreasing cash (or increasing accounts payable) and increasing the property, plant and equipment account.
    • Define a business activity and describe how it affects the balance sheet
  • Temporal Classification

    • Most accounting balance sheets classify a company's assets and liabilities into distinct groups such as current assets property, plant, equipment, current liabilities, etc.
    • Cash, receivables, and liabilities are re-measured into U.S. dollars using the current exchange rate.
    • Inventory, property, equipment, patents, and contributed capital accounts are re-measured at historical rates resulting in differences in total assets and liabilities plus equity which must be reconciled resulting in a re-measurement gain or loss.
    • Assets and liabilities valued at current costs use the current exchange rate and those that use historical exchange rates are valued at historical costs.
    • By using the temporal method, any income-generating assets like inventory, property, plant, and equipment are regularly updated to reflect their market values.
  • Cost of Equipment

    • The cost of equipment is the item's purchase price, or historical cost, plus other initial costs related to acquisition and asset use.
    • Fixed assets, also known as non-current or tangible assets, include property, plant, and equipment.
    • These additional costs can include import duties and deductible trade discounts and rebates.
    • Historical cost also includes delivery and installation of the asset, as well as the dismantling and removal of the asset when it is no longer in service.
    • When an equipment is sold, the sale of the asset can trigger a gain or a loss, depending on the difference between the equipment's net book value and its sale price.
  • Assets

    • Assets on a balance sheet are classified into current assets and non-current assets.
    • A non-current asset is a term used in accounting for assets and property which cannot easily be converted into cash.
    • Non-current assets include property, plant and equipment (PPE), investment property (such as real estate held for investment purposes), intangible assets, long-term financial assets, investments accounted for by using the equity method, and biological assets, which are living plants or animals.
    • Property, plant, and equipment normally include items such as land and buildings, motor vehicles, furniture, office equipment, computers, fixtures and fittings, and plant and machinery.
    • They are created through time and effort, and are identifiable as a separate asset.
  • Fixed Assets Turnover Ratio

    • Fixed assets, also known as a non-current asset or as property, plant, and equipment (PP&E), is a term used in accounting for assets and property that cannot easily be converted into cash.
    • These are items of value that the organization has bought and will use for an extended period of time; fixed assets normally include items, such as land and buildings, motor vehicles, furniture, office equipment, computers, fixtures and fittings, and plant and machinery.
    • The primary objective of a business entity is to make a profit and increase the wealth of its owners.
    • Fixed-asset turnover is the ratio of sales (on the profit and loss account) to the value of fixed assets (on the balance sheet).
    • A declining ratio may indicate that the business is over-invested in plant, equipment, or other fixed assets.
  • Components of the Balance Sheet

    • The balance sheet contains statements of assets, liabilities, and shareholders' equity.
    • Assets represent things of value that a company owns and has in its possession, or something that will be received and can be measured objectively.
    • They are also called the resources of the business, some examples of assets include receivables, equipment, property and inventory.
    • They are obligations that must be paid under certain conditions and time frames.
    • Generally, sales growth, whether rapid or slow, dictates a larger asset base - higher levels of inventory, receivables, and fixed assets (plant, property, and equipment).
  • Sporophytes and Gametophytes in Seedless Plants

    • The sporophyte of seedless plants is diploid and results from syngamy (fusion) of two gametes.
    • Seedless, non-vascular plants produce only one kind of spore and are called homosporous.
    • Heterospory is observed in a few seedless vascular plants and in all seed plants.
    • Many seedless plants produce sperm equipped with flagella that enable them to swim in a moist environment to the archegonia: the female gametangium.
    • Describe the role of the sporophyte and gametophyte in plant reproduction
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