This chapter continues the discussion of the balance sheet. We will introduce some new concepts and factors. But before we plunge back into the balance sheet itself, we need to cover a few other items.
Items shown on the balance sheet are shown at original cost, unless they have been written down. This means that items go onto the balance sheet at their original cost. If something is purchased at an inflated cost, it goes on the balance sheet at that cost, even if it is actually worth much less.
If an asset is purchased at a great bargain and its value is really much greater than the cost, it still goes onto the balance sheet at its cost.
Assets may be reduced in value—written down—when the company wants ...