Which directive concerns fixed asset accounting?

Which directive concerns fixed asset accounting?

• A. Directive No.1.
• B. Directive 85-2.
• C. Directive No.3.
• D. Directive 85-3.

Answer: (B)

Fixed asset accounting covers how long-lived capital assets are recognized, valued, depreciated, and disposed of, along with keeping an accurate asset inventory for reporting purposes. Directive 85-2 is the one that lays out these policies—when to capitalize a purchase, how depreciation should be calculated and recorded, how disposals are handled, and how fixed assets are reported in financial statements. Because 85-2 specifically addresses these practices, it is the directive that governs fixed asset accounting. The other directives focus on areas outside fixed assets, so they don’t establish the policies used for capital asset recognition and depreciation.

Fixed asset accounting covers how long-lived capital assets are recognized, valued, depreciated, and disposed of, along with keeping an accurate asset inventory for reporting purposes. Directive 85-2 is the one that lays out these policies—when to capitalize a purchase, how depreciation should be calculated and recorded, how disposals are handled, and how fixed assets are reported in financial statements. Because 85-2 specifically addresses these practices, it is the directive that governs fixed asset accounting. The other directives focus on areas outside fixed assets, so they don’t establish the policies used for capital asset recognition and depreciation.