I-managed company, the economic value related to an asset exceeds its accounting value. Explain.

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Answer 1

Answer #1

Economic Value of an Asset:

It refers to value of asset that company derives by using the asset. Hence, it differs from one individual to another.

Accounting Value of an Asset:

It refers to a value at which asset were recorded in the books of accounts. For example- Historical cost, written down value, Revalued Amount etc.

How Economic Value related to an Asset exceeds its Accounting Value:

Since, Economic value of an asset is based on individual preference Hence, the economic value of an asset can be significantly differ for two companies or more.

A well Managed company can utilize the asset optimally and can generate maximum output by using assets and hence its economic value exceeds its accounting value.

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I-managed company, the economic value related to an asset exceeds its accounting value. Explain.

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