Forums
Back
Acc
Accountancy
can anyone simply explain the meaning of floating charge and Obsolescence whixch was given in below image ....pls tq....
Answers (4)
A floating charge is a security interest or lien over a group of assets in general . It applies to assets with a quantity and value that can change periodically, such as stock, debtors and moveable plant and machinery. The lien is not on one specific asset. So the lendee can dispose the assets under charge freely. For example for working capital loan banks have lien on stocks..... The company can still sell stocks during the period of loan
Obsolescence - asset becoming out of date and losing its economic value . If an asset becomes obsolete, its not valued at its cost. If inventory becomes obsolete (outdated) items are supposed to be charged to the Income statement because as per prudence provide for all possible losses. . A fixed asset may become obsolete even before the end of its predicted useful life. Reasons could be Continuous improvement, innovation, market trends, etc.
Your Reply