The life cycle of an operational asset

House And Dollar Balancing Showing InvestmentThe life cycle of an operational asset involves

Acquiring the funds to buy the assets:

  • It may be necessary for a business owner to raise funds to buy expensive assets. Not all assets require raising funds, some assets can be bought with the available cash in the business

Purchasing the assets:

  • Assets begin their life when an entity acquires it for use. Once the asset is purchased, the business owner estimates how long the asset will be used in the revenue generation process.

Using the assets:

The asset is used during its life time to aid in the revenue generation process. The part of the asset that is used up is expensed. The process of expensing an asset is called depreciation.

Retiring the asset:

  • Once the asset has reached its life, it is retired from active use. At this time the business owner can choose to sell the asset. The amount the asset can be sold for after it is retired is called the salvage value.

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