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Why should you first distinguish fixed assets whose value follows the inflationary rate of productive material that really depreciate over time?

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Question added by Nadjib RABAHI , Freelancer , My own account
Date Posted: 2017/03/15
teresah njoki
by teresah njoki , RECEPTIONIST , Hilton Hotels World Wide

An inflation rate gives us a consensus or aggregate measure of the price changes occurring for a number of different goods and services that we typically consume.

Fixed assets are not held for resale but for the production, supply, rental or administrative purposes. Assets that held for resale must be accounted for as inventory rather than fixed asset. 

Depreciation is systematic allocation the cost of a fixed asset over its useful life. It is a way of matching the cost of a fixed asset with the revenue (or other economic benefits) it generates over its useful life. Without depreciation accounting, the entire cost of a fixed asset will be recognized in the year of purchase. This will give a misleading view of the profitability of the entity.

 

 

Ashraf E. Mahmoud (PhD)
by Ashraf E. Mahmoud (PhD) , University Lecturer, Freelancer Consultant and Trainer for Int'l Business & Banking TF. , FreeLancer

Thanks for invitation,

"Inflation Rate", in general gives an indication for pricing trends in the near future, and also an impression for any adjustments needed or to be considered upon we planning for the fixed assets depreciation. 

Mohammad Iqbal Abubaker
by Mohammad Iqbal Abubaker , Jahaca Pty Ltd - Accounts Administrator , Jahaca Pty Ltd - Accounts Administrator

The answer is very good by teresah njoki  Customer Service Representative /ممثلة خدمة عملاء

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