Appreciation
Appreciation refers to an increase in the value of assets over a period of time. This increase in the value of assets may take due to various factors, such as an increase in demand, an increase in interest rates, or when there is inflation in the economy.
The following treatment takes place in respect of Appreciation:
A. If Appreciation is given outside the trial balance:
In such a case, two effects will take place:
- First, it will be shown in the Cr. side of the Profit & Loss A/c.
- Second, the amount of fixed assets appearing in the Balance Sheet would increase by the amount of appreciation.
B. If Appreciation is given Inside the trial balance:
In such a case, it will be shown only on the Cr. side of the Profit & Loss A/c.
Financial Statement with Adjustment with Examples-III
Through adjustments in the financial statement, we consider all the accounting items which are relevant to the current financial year but not recorded in the books due to any reason or wrongly recorded. This helps us in getting the actual profit or loss for the year and the accurate financial position of the company. Five adjustments, such as Depreciation, Appreciation, Bad Debts, Provision for Bad & Doubtful Debts, and Bad Debts Recovered are discussed below: