A capital asset is property of any type held by an individual or business, excluding inventory and certain other types of property. Capital assets can include buildings, land, equipment, vehicles, stocks, and bonds.
An essential concept in accounting and finance that pertains to providing capital for a company, managing its capital structure, converting reserves into capital, and accounting for capital expenditures.
The depreciable amount is the value of a fixed asset used as the basis for calculating the depreciation charge for a specific period.
A fixed asset that is subject to depreciation to account for its loss in value over time. Depreciation is a systematic process of expensing the cost of tangible assets over their useful lives.
The percentage rate used in various methods of depreciation to determine the amount of depreciation that should be written off a fixed asset and charged against income or the profit and loss account.
An offset account reduces the gross amount of another account to derive a net balance, such as a fixed asset account that is offset by a depreciation account.
A permanent diminution in value refers to a fall in the value of an asset that is unlikely to be reversed over time. This reduction must be reflected in the balance sheet and necessitates adjustments through the profit and loss account.
Wear and tear refers to the reduction in value of a fixed asset as a result of its regular usage and the inevitable damage it sustains over its working life. It is one of the primary reasons behind asset depreciation.
