The Nature Of Property And Equipment Property, plant, and equipment assets are also referred to as operational assets or as fixed assets. The property, plant, and equipment of a service company typically includes desks, chairs, and typewriters. All of these items normally have a useful life of more than one year. In contrast office supplies such as stationery and pencils typically have a relatively short life and are regarded as current assets. The property, plant, and equipment category should include only items that are actually used in the normal course of business. An item purchased to be resold at some time in the future and not actually used by the business should be accounted for as a temporary or longterm investment, not as an item of property, plant, and equipment. Measurement Issues For Property, Plant, And Equipment The reporting and measurement issues associated with accounting for property, plant, and equipment assets are (1) determining cost, (2) determining periodic depreciation, (3) recording subsequent expendi-tures, (4) recording disposals, and (5) recording exchanges. Cost Determination Historical cost, the amount originally paid for an asset, is the basis of accounting for all items of property, plant, and equipment. The recorded cost of a particular asset should include all the expenditures necessary to get the asset set up and ready for use in the manner intended by the business. Thus, the recorded cost of an asset may include a number of incidental items such as sales tax on the original purchase price, delivery and installation charges, and the cost of any modifications or additions necessary to prepare the asset for its intended use. For example, assume that a business located in San Antonio, Texas, purchases a desktop computer from a firm in Dallas, Texas, FOB Dal-las. The sale price of the computer is $2,000. Assume that the transaction is subject to a sales tax of 5 percent and that transportation charges from Dallas to San Antonio are $50. Further assume that in order to use the computer as intended, a special cable costing $65 must be purchased. The total cost of the computer is $2,215, the sum of the sale price, sales tax, transportation, and the necessary cable. Assuming that the computer is purchased for cash, the general journal entry to record this transaction is: In general, property, plant, and equipment items should be classified in the accounting records based on their physical characteristics. Items with similar characteristics may be combined into a single ac-count. It is much easier to combine two or more accounts in order to prepare a condensed balance sheet than to attempt to extract the detailed records for a single asset from an account that reflects a large number of individual assets.