At final accounts we will depreciate the value of all assets but appreciate the value of the Land Why?

Question

While preparing final accounts like balance Sheet and P & L Account we will depreciate the value of all the fixed assets like Furnitures mercenaries and all other assets, But always appreciate the value of the Land Why?

Land is also a fixed asset like furnitures and machenaries but also the deffurance

Answer 1

good noon friend,

when there is a demand for any kind of goods its price and values are increased always. the land is can not be produce by human beings, and unavoidable thing which is given by nature.

we less the depreciation on fixed asset because of it's usage, it has some repairs or reduction in value. but in case of land we can't less that's value.

  

if you have any suggestion please mail me..

thank you.

Answer 2

Accounts works on common sense, like you can simply understand that when you use any item it deteriorates, so its value decreases, thats why you depreciate for furniture , machines, , etc.

but in case of land as its price is increasing day by day you increase the value of land i.e. re-evaluate it, also Govt. of India has a notification according to which a company can re-evaluate its plant and land value to the present value. you can see this in annual report of any company where they re-evaluate their fixed assets,

Answer 3

This is all the the land that anybody is ever going to get, unless you want to live on mars or the moon. We are not getting anymore land.

Answer 4

Fixed assets are intended for use and not for resale. Therefore to value Fixed assets, for Balance sheet purposes, in principle, the change in market price should not be considered. Fixed assets should be valued at original cost less depreciation to till date. Depreciation is a permanent fall in value of assets, caused by wear and tear (usage) and Passage of time (ageing). Buildings, machines,furniture etc. depreciate because of the reasons mentioned above. But land will not lose its value by usage or ageing. Therefore, land does not at all depreciate. Even after 20 years, land will appear in Balance sheets at its historical cost, which when compared to its current market value, will be very very low.

For long term borrowings, land is often given as security. Banks extend loan facilities based on the value of security given. Modern accounting therefore allows revaluing the land to its current market price, to show an increased value in Balance sheet. But, if its done, a Revaluation Reserve has to be necessarily created to the extent of the increase made in the value of the asset.

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