Before we get into the process flow in the AM module, let's take some time to understand a few basic concepts.
Accounting standards treat the fixed assets differently from current assets. For example, when an organization buys stationery items such as pens and notepads, they are considered as business expenses and are immediately recognized. Similarly, other assets such as cash, securities, and so on are called current assets. On the other hand, assets such as machinery, buildings, and vehicles are known as fixed assets. Fixed asset purchases, although paid for fully, are considered as expenses over a period of time.
Any asset (we'll be referring to only fixed assets in this chapter) has a specified useful life. This is the duration for which an organization can reasonably use that asset for its business activities. For example, a car can have a useful life of eight years, while the same can be three years for a computer. Throughout the life of an asset, its initial...