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Under the Double Account System, how is the replacement of an old asset handled when a new asset is acquired?
- a)The old asset is written off, and the new asset is capitalized.
- b)Depreciation is charged to the asset account.
- c)The old asset remains in the books at its book value.
- d)Both old and new assets are expensed.
Correct answer is option 'C'. Can you explain this answer?
Verified Answer
Under the Double Account System, how is the replacement of an old asse...
Under the Double Account System, the old asset continues to be recorded in the books at its book value, and the cost of replacement is allocated between capital and revenue.
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Under the Double Account System, how is the replacement of an old asse...
Understanding the Double Account System
The Double Account System is a unique accounting method often used in public utilities and similar sectors. When it comes to handling the replacement of old assets, this system has specific procedures.
Old Asset Treatment
- The old asset remains on the books at its original book value.
- This means that even when a new asset is acquired, the old asset is not immediately written off or removed from the financial statements.
New Asset Acquisition
- When a new asset is acquired, it is capitalized on the balance sheet.
- The new asset does not affect the book value of the old asset; both assets coexist in the accounting records.
Rationale for Option 'C'
- Maintaining the old asset at its book value allows for better asset management and tracking of historical costs.
- This practice provides a clearer picture of the utility’s asset base and ensures that stakeholders can see the full scope of investments made over time.
Conclusion
- Option 'C' is correct because it adheres to the principles of the Double Account System, emphasizing the importance of tracking both old and new assets separately.
- This approach enhances transparency and aids in long-term financial planning.
The Double Account System is a unique accounting method often used in public utilities and similar sectors. When it comes to handling the replacement of old assets, this system has specific procedures.
Old Asset Treatment
- The old asset remains on the books at its original book value.
- This means that even when a new asset is acquired, the old asset is not immediately written off or removed from the financial statements.
New Asset Acquisition
- When a new asset is acquired, it is capitalized on the balance sheet.
- The new asset does not affect the book value of the old asset; both assets coexist in the accounting records.
Rationale for Option 'C'
- Maintaining the old asset at its book value allows for better asset management and tracking of historical costs.
- This practice provides a clearer picture of the utility’s asset base and ensures that stakeholders can see the full scope of investments made over time.
Conclusion
- Option 'C' is correct because it adheres to the principles of the Double Account System, emphasizing the importance of tracking both old and new assets separately.
- This approach enhances transparency and aids in long-term financial planning.
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Under the Double Account System, how is the replacement of an old asset handled when a new asset is acquired?a)The old asset is written off, and the new asset is capitalized.b)Depreciation is charged to the asset account.c)The old asset remains in the books at its book value.d)Both old and new assets are expensed.Correct answer is option 'C'. Can you explain this answer? for B Com 2025 is part of B Com preparation. The Question and answers have been prepared according to the B Com exam syllabus. Information about Under the Double Account System, how is the replacement of an old asset handled when a new asset is acquired?a)The old asset is written off, and the new asset is capitalized.b)Depreciation is charged to the asset account.c)The old asset remains in the books at its book value.d)Both old and new assets are expensed.Correct answer is option 'C'. Can you explain this answer? covers all topics & solutions for B Com 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Under the Double Account System, how is the replacement of an old asset handled when a new asset is acquired?a)The old asset is written off, and the new asset is capitalized.b)Depreciation is charged to the asset account.c)The old asset remains in the books at its book value.d)Both old and new assets are expensed.Correct answer is option 'C'. Can you explain this answer?.
Under the Double Account System, how is the replacement of an old asset handled when a new asset is acquired?a)The old asset is written off, and the new asset is capitalized.b)Depreciation is charged to the asset account.c)The old asset remains in the books at its book value.d)Both old and new assets are expensed.Correct answer is option 'C'. Can you explain this answer? for B Com 2025 is part of B Com preparation. The Question and answers have been prepared according to the B Com exam syllabus. Information about Under the Double Account System, how is the replacement of an old asset handled when a new asset is acquired?a)The old asset is written off, and the new asset is capitalized.b)Depreciation is charged to the asset account.c)The old asset remains in the books at its book value.d)Both old and new assets are expensed.Correct answer is option 'C'. Can you explain this answer? covers all topics & solutions for B Com 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Under the Double Account System, how is the replacement of an old asset handled when a new asset is acquired?a)The old asset is written off, and the new asset is capitalized.b)Depreciation is charged to the asset account.c)The old asset remains in the books at its book value.d)Both old and new assets are expensed.Correct answer is option 'C'. Can you explain this answer?.
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