Thus, such assets are more or less of permanent character and are used for the purpose of earning profits. The utility of these assets remains so long as they are in working order.

Thus, market price of realizable value of these assets is not considered for their valuation as they are not meant for resale in the market. The utility of such assets is not in the least affected by their market value being low or high. Service of experts are sought to recommend the estimated amount of depreciation in each case.

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(2) Floating (Current) Assets:

The assets which cannot be put to constant uses are floating or current or circulating assets. Floating assets are meant for resale or are processed or produced for the purpose of sale and converting them into cash. Closing stock, semi-manufactured goods, book debts, bills receivable, cash, etc., are some of the examples of floating assets.

The valuation of floating assets should be done at the cost or the market price whichever is less. This is an important issue to be considered. This clearly means that anticipated profits must not be accounted for while expected losses must always be taken note of. This is essential.

The profits which have not yet been earned cannot be called and treated as actual profit in the strict sense of the term and even if they are treated as such for the present, it will be a great shock to the business in case there is loss instead of profit as anticipated.

Similarly, if dividend is also distributed out of such anticipated profits to the shareholders of a company, it will not be a sound policy in the interests of the business itself and in the future, if it is a loss, money so distributed will not be taken into account at present and even if a loss occurs at a later stage, the business will not be affected adversely and if there is no loss, it is quite good for the business.

This is the reason as to why the guiding principle, i.e., cost price or market price whichever is less, is followed for the valuation of floating assets.

(3) Intangible Assets:

Intangible assets do not have their form and hence, they are visible in their concrete form. However, they are equally well serviceable and valuable for a business concern like any other assets.

They are actually fixed assets without any concrete form. Goodwill, patents, copyrights, trademarks, etc., are some of the examples of such assets. Intangible assets are more or less treated as Fixed Assets for the purpose of valuation.

(4) Fictitious Assets:

Fictitious Assets are different by their nature itself. Such assets are not physically visible, though, of course, money is spent in their case or are unrealizable assets.

The example of such assets are preliminary expenses in a new company, special advertising expenses, development expenses, debenture discount and issue expenses, discount of issue of shares, share issue expenses, etc. These items are really items of expenditure not represented by actual values and have no exchange value.

Hence fictitious assets are of peculiar nature and are represented by the revenue expenditure that has been temporarily, capitalized with the ultimate object of spreading the amount over several future years.

Practically, these assets appear in the Balance Sheet as the amount of expenditure or loss represented, less any amount written off from year to year to the Profit and Loss Account.

It is, thus, evident that an auditor has to be very careful and cautious in examining the valuation of assets. He should remember that the accuracy of the Profit and Loss Account and Balance Sheet depends upon the accuracy of the valuation of assets.

But he is not a value or a technical expert who can estimate the value of assets which are different in their nature and character. As such, he has no alternative but to rely upon the valuation made by directors, partners, technical experts, surveyors, etc.

He has to satisfy himself that the valuation of assets has been correctly made according to some accepted principles. He should ensure that such valuation appears to him to be fair and reasonable. If some fairly ordinary methods of valuation are adopted, the auditor can examine himself of such methods and report on them.

He should specially note the following two things:

(i) How far the principles of accounting have been adopted in the valuation of assets.

(ii) Whatever steps are taken in the valuation of assets are based on the established practices already in vogue in the business and are the procedures already accepted in previous years.