Valuation of various assets can be made by using different methods. Valuation of fixed assets can be made in different ways. Some of the major methods are as follows:
In this method, valuation of assets is made on the basis of purchase price of the assets. It is very simple method of valuation of assets. Sometimes, existence of one assets depends on the existence of another. Then it is difficult to use this method.
Valuation of assets can be made on the basis of market price of such assets. But if same nature of assets is not available in the market, it is very difficult to determine the value of such assets. So, there are two methods related to it. They are:
If same asset is to be purchased then on the basis of same value, valuation of assets can be done.
It refers to the price in which such asset can be sold in the market. But expenditure incurred at the sale of such asset should be deducted.
Under this method of valuation of asset, company should maintain certain level of stock and valuation of stock is made on the basis of valuation of base stock.
Some of the business organizations fix the standard cost on the basis of their past experience. On the basis of standard cost, they make valuation of assets and present in the balance sheet.
It is a simple method for the valuation of such assets which cannot be distinguished. Like petrol, petrol is kept in the tank but e cannot separate its stock on the basis of lot. So, valuation of stock is made adding to all the cost and dividing by the quantity.
1. Cost Method
In this method, valuation of assets is made on the basis of purchase price of the assets. It is very simple method of valuation of assets. Sometimes, existence of one assets depends on the existence of another. Then it is difficult to use this method.
2. Market Value Method
Valuation of assets can be made on the basis of market price of such assets. But if same nature of assets is not available in the market, it is very difficult to determine the value of such assets. So, there are two methods related to it. They are:
i. Replacement Value Method
If same asset is to be purchased then on the basis of same value, valuation of assets can be done.
ii. Net Realizable Value
It refers to the price in which such asset can be sold in the market. But expenditure incurred at the sale of such asset should be deducted.
3. Base Stock Method
Under this method of valuation of asset, company should maintain certain level of stock and valuation of stock is made on the basis of valuation of base stock.
4. Standard Cost Method
Some of the business organizations fix the standard cost on the basis of their past experience. On the basis of standard cost, they make valuation of assets and present in the balance sheet.
5. Average Cost Method
It is a simple method for the valuation of such assets which cannot be distinguished. Like petrol, petrol is kept in the tank but e cannot separate its stock on the basis of lot. So, valuation of stock is made adding to all the cost and dividing by the quantity.