## Sunday, December 18, 2016

### Net Block (Fixed Assets) Definition

 Happy frog imagining the concept of Net Block of Fixed Assets

#### Meaning:

‘Net Block’ represents the original cost of acquisition of assets after adjusting for or deducting depreciation for wear-and-tear.

Conventionally in the financial statements fixed assets are depicted under three blocks or groups as under:

1.     Gross
2.     Depreciation
3.     Net

Each of these blocks are further classified into:

1.     Amount standing at the beginning of the year (Opening Balance)
3.     Deletions (sold or disposed off) during the year
4.     Amount standing at the end of the year (Closing Balance)

‘Net Block’ is obtained after deducting depreciation from the ‘Gross Block’.

#### Formula:

 Formula for computing Net Block of Fixed Assets

#### Example:

Following Example shall make things more clear:

 GROSS BLOCK DEPRECIATION NET BLOCK Opening Balance Additions Closing Balance Opening Balance For the year Closing Balance Opening Balance Closing Balance A1 B1 C1 A2 B2 C2 A3 = (A1-A2) C3 = (C1-C2) 10000 5000 15000 1000 1500 2500 9000 12500

In conclusion net block of fixed assets is the original cost, adjusted for depreciation charge.