Accounting

Property Plant and Equipment (P'P&E)
P’P&E are non-current (physical) assets acquired by the business for use in operations, rather than for resale to customers.

These assets are used by theentity to provide economic benefits over more than one accounting period.
Examples include: buildings,motor vehicles, plant, equipment

Cost of Acquisition- P,P&E
Cost of acquisition = purchaseconsideration at time of acquisition
plus directly attributable costs incurred in acquiring the assets

Purchase consideration= fair value of what is qiven up (cash paid and / or liabilitiesundertaken) to acquire the asset

Fair Value is the amount for which the asset can be exchanged
between knowledgeable willing parties in an arm's length transaction

Directly Attributable Costs = anycosts necessarily incurred in getting the asset to a location and condition ready for its intended use.

Examples include delivery costs, stamp duty, insurance while in transit, costs of installation,assembly costs, costs of testing whether the asset works, staff training.

NOTE: GST is NOT included in the cost, it is recorded separately in
GST Outlays as it is a recoverable amount - thismeans the business
will receive a refund from the tax Office for the GST paid

Example: Date Dr Non-current Asset $ cost of acquisition
Dr GST Outlays
Cr Cash at bank / Loan payable(to record purchase of non-current asset)

Costs that are not necessary or do not increase the future economic
benefits of the asset should be excluded from the acquisition cost.
Example: costof repairs to an asset that was damaged due to carelessness when installing (These costs should be expensed)

Cost of Acquisition - Land
The cost of land is the purchase price plus other feesincluding real estate agent's commission and stamp duty related to the purchase
plus any expenditure for clearing the land and removing any buildings
to prepare the land for its intended use.

Land...