Accounting for IGCSE & O level - Final Statements (Section 9 - No. 38)
If a business purchases equipment and uses it for several years, how is this purchase treated in the statement of financial position?
It's written off as an expense in the year of purchase.
It's recorded as an asset (equipment) and depreciated over time.
It's ignored, as it is not cash.
It's added to the bank balance.
Paliwanag
Equipment is recorded as an asset and depreciated to spread the cost over its useful life.