Found 105 Articles for Accounting

Non – recourse factoring is an agreement made between factor and the client in which, there is no absorb for unpaid invoices.Higher fees.Lower liability.Unpaid invoices are not covered.Rate ranges from 3-5 %.A non – recourse factoring does not offer you protection, if there exists any of the below mentioned conditions −Customer is not satisfied with your service/products.There is delay in payments.There are disputes between invoices and pay.If there are any credit issues or any insolvency, they will make payments.Benefits of Non- recourse financing are as follows −Transfer of insolvency.Strong capital.Administrative costs decreases.Assessment of risk profile is done by factor.Client reliability ... Read More

Recourse factoring is an agreement between client and factor in which, client had to buy back unpaid bills receivables from factor. In case of default payers factor can claim their money, agreement will specify in how many days the payment should refund in advance. Whether money will refund or not, we have to still pay interest and fee.Replace with goods invoice with same value as of unpaid invoice.Pay with the help of withheld fees.Pay in instalments.Uses of recourse factoring are as follows −Creditworthy invoice clients.Need not pay high fees.Access to capital.Access to capital.Regular cash flows.Improves payment flows.Improves competitiveness.Some of the ... Read More

Factoring is a financial arrangement between the company and financial institute, in which company get money in form of advance in return for receivables from financial institution. In this, company is called client and financial institution is called factor. Factoring agreements involves the factor, the client and a customer.Functions of a factor are as follows −Maintain accounts.Providing advisory services.Providing short-term finance.Providing credit protection.Providing collection facilities.Features of factoring are as follows −Clients credit is covered through advances.Cash advances.Collection services.Provide advice.Steps involved in factoring are as follows −Customer places an order to seller.Agreement is made between the factor and seller.Sale contract is ... Read More

Venture capital is the capital supplied to start ups or any small business by the investors in the form of share capital believing they have long term growth in their business.Though, it involves risk in investing to the investors, they invest by seeing attractive payoff. The investors are capitalists. In venture capital, ownership is distributed to limited partners.Methods of venture capital financing are as follows −Equity financing − Equity financing is important for new companies, as they are not able to give returns on time to its investors.Conditional loan − Lender will only charge royalty instead of interest.Income note − ... Read More

Leverage lease is an agreement between lessor and lender. This agreement tell that lessor purchases the asset from the lender by acquiring funds from third part or from taking loan from financial institutions.In this, the lessor transfers lease rents to financial institution or to the third party. The financial institutions or third party charges loan instalments and balance amount (if any) will be transferred to lessor.Characteristics of leverage ratio are mentioned below −Transfer ownership to the lessor at the end of lease.Lessee can buy the asset below fair value.Lease terms is for about 3/4th of asset economic life.Minimum lease payments ... Read More

Operating leverage is ratio between company’s fixed costs to its variable cost. It tells about how company is using its fixed cost to regenerates its revenue. If the fixed costs are high, company generates high leverage ratio which leads to high profits.If the fixed costs are low, company will generate low leverage ratio and leads to low profits. Operating leverage calculates company’s breakeven point and tells about the effectiveness of pricing structure.Scenarios of leverage ratio are as follows −High operating cost − Company will earn larger profit, when it attains sufficient sale volume to cover its fixed cost.Low operating cost ... Read More

The main objective of leverage is the maximisation of wealth of the shareholders. Financial leverage refers to buying the additional assets which company uses as its debt. The more the debt, more the leverage of that company.However, more leverage will increase risk of failure. It is also called as trading on equity. Financial leverage represents left hand side of balance sheet.Increase value of asset shows gain in owner’s cash.Decrease value of asset shows loss in owner’s cash.Measure of financial ratios are as follows −Debt ratio = (debt/total assets)Debt ratio = (debt/total assets)Interest coverage ratio = (profits/interest)Degree of financial leverageDegree of ... Read More

In leasing, the company which leases is called lessor and the user is called lessee. The agreement made between lessor and lessee is called leasing. Different types of leasing are operating lease, financial lease, sale and lease back and leverage lease.Financial lease is an agreement in which lessor receives lease payments. In this lessor is responsible for maintenance, taxes and insurance. In this there will be substantial transfer of risk and rewards to lessee.Main features of financial lease are as follows −Lessee selects an asset.Lessor purchases that asset.Lessee uses that asset during the time.Lessee pays rentals for using the asset.Lessee ... Read More

Below are the basic stock trading terms −Buy − Buy shares in company.Sell − Selling of shares after meeting the target (personal) or to minimise loss.Ask − People are looking to sell their shares or looking get for their shares.Bid − Willing to pay for a stock.Ask – Bid spread − Difference between what people are spending and what they want to get.Bull − Investors will expect prices rise.Bear − Investors will expect price fall.Limit order − Order that tells about a price to buy or sell.Market order − Executes order as quickly as possible.Day order − It tells a ... Read More

SolutionThe solution is given below −Cost = (175000 + 45000 – 0)/95000       = $ 2.32 per tonDepletion of mine = $ 2.32 * 60000       = $ 139200Depletion expenses = total depletion of mine – depletion (unsold)       = 139200 – (2.32 * 15000)       = $ 104400b) Calculate depletion expenses and prepare a journal entry for the following.A company purchases an oil field for $ 2.5 mm and estimated 8, 00, 000 gallons of oil reserves. Cost allocated per gallon is $ 2.75. In the first year, they extracted 1, 80, 000 gallons of ... Read More