Appraisal Capital Explained

Appraisal capital is a process of accounting assets. As the name indicates it is the capital that is appraised when it occurs within a business. Appraisal capital is gathered or accumulated when the market value of the asset is recorded more than that of its book value. That means that the asset is valued more as compared to its actual value. The difference between these values that is the booked value and the appraised value is called appraisal capital.

The appraisal capital is recorded in balance sheet as an entry of equity. It is debited against the account of the actual asset and termed as the equity of the stockholder of the business and is credited in the equity account of the business. The concept of appraisal capital is usually not used in accounting methods in USA as the exceeded value of asset may result in an inappropriate and inaccurate calculation of the capital associated with that asset.

The terms associated with appraisal capital are the appraisal costs and the appraisal depreciation. The appraisal costs and appraisal depreciation are calculated on the bases of appraisal capital. In order to calculate appraisal capital a number of features of an asset are considered such as the cost of the asset, the income generated by the asset, the market value of the asset and the comparison of this asset with the other assets.

Appraisal approach of valuating an asset is used to appraise high valued assets such as real estate, building, expensive vehicles and other large businesses.

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