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Finance Articles
Page 19 of 21
Describe concept of composite depreciation.
Composite depreciation claims depreciation expenses by depreciates group of related assets into single entity than individual. Composite depreciation is the application of straight-line depreciation. If the asset is sold, then account entry is debited to cash and credited to fixed asset. The difference between original cost and sold cost is debited to accumulated depreciation. In composite method, no loss or no gain on sale of fixed asset is recognized.Steps to calculate composite depreciation are as follows −Accumulation of total depreciation cost of assets.Allocate single useful life for asset group.Yearly depreciation = useful life/ total depreciation.Document the depreciation.ExampleCalculate depreciation using composite ...
Read MoreDifference between working capital and fixed capital.
The major differences between working capital and fixed capital are as follows −Working capitalFixed capitalUsed for daily business activities.Used for long term benefits.Acquires current assets.Acquires non-current assets.If needed, these can be converted into cash immediately.If needed, these can’t be converted into cash immediately.It has liquidityIt has no liquidity.Serves short period of time.Serves long period of time.Less than one accounting period.More than one accounting period.Operational based.Strategy based.Company needs working capital for operations.Company consumes indirectly.
Read MoreExplain revaluation method of depreciation.
Revaluation method of depreciation is the easiest method of depreciation. In this method, the asset value is assessed at the staring of the year and at the end of the year and difference between them is considered as depreciation to be charged. Revaluation method of depreciation will be done on fixed assets. Revaluation can be done by external party (professional) or internally.FormulaDepreciation expenses = (AV)sy + A – D – (AV)eyHere, (AV)sy = asset value at the start of the yearA = any additions during the yearD = any deductions during the year(AV)ey = Asset value at the end of ...
Read MoreDifferentiate between sinking fund depreciation and annuity method of depreciation.
The major differences between sinking fund depreciation and annuity method of depreciation.Sinking fund depreciationAmount generated through depreciation is invested in market securities.Funds available for replacement of assets.First entry of interest will be made at the end of second year.Sinking fund table is used to calculate depreciation.Cost – interest = depreciation charged.Interest increases with years.Asset value is same.Effect on P&L is same.Annuity method of depreciationAmount generated through depreciation is not invested in market securities.Funds not available for replacement of funds.Interest will be earned from starting day onwards.Annuity table is used to calculate depreciation.Cost + interest = depreciation charged.Interest decreases with years.Asset ...
Read MoreHow journal entries are made or how to prepare journal entries?
SolutionThe solution is as follows − Journal entriesDateParticularsDrCr1-1-2000Lease accountTo Bank account(Being purchase of lease)250000250000Depreciation fund policy accountTo Bank account(Being the annual premium paid)450004500031-12-2000Profit and loss accountTo depreciation fund account(Being annual depreciation charge)45000450001-1-2001Depreciation fund policy accountTo bank account(Being annual premium paid)450004500031-12-2001Profit and loss accountTo Depreciation fund account45000450001-1-2002Depreciation fund policy accountTo bank account(Being annual premium paid)450004500031-12-2002Profit and loss accountTo Depreciation fund account(Being annual depreciation charged)4500045000Bank accountTo Depreciation fund policy A/c(Being policy money realized on maturity)250000250000Depreciation fund policy accountTo Depreciation fund account(Being profit transferred to fund)115000115000Depreciation fund accountTo old lease account(Being closure of fund ...
Read MoreExplain insurance policy method of depreciation
Insurance policy method is just like sinking fund method of depreciation, but in this method, the money is used to pay premium for insurance company. Premium will be charged at the start of the year. Money at the end of maturity can be used to buy a new asset. Journal entriesDateParticularsDrCrXX/XX/XXXXInsurance policy A/cTo cash A/cTo sinking fund A/c(Being premium paid at the end of the year)XXXXXXXX/XX/XXXXProfit and Loss A/cTo Depreciation A/c(Being Depreciation is charged)XXXXXXXX/XX/XXXXCash A/cTo insurance policy A/c(Being money received on maturity)XXXXXXXX/XX/XXXXInsurance policy A/cTo Depreciation fund A/c(Being Transfer of excess amount ...
Read MoreWrite the difference between short term capital gain and long term capital gain.
The major differences between short term capital gain and long term capital gain are as follows −Short term capital gainsHeld for less than a year or a period and then sold off.Difference between consideration received and cost basis (short term asset).If the asset is owned for less than 24 months it is considered as immovable property and if it is owned for less than 36 months it is termed movable property.Easily tradable and liquid assets.Short term view of market.Lesser profits compared to long term gains.Less risk.Tax rates are same as income tax for individuals.Taxes may be reduced by including short ...
Read MoreWhat is meant by recycling unicorns?
In the world of business, Unicorns are by no means the mythical single horned Equus; it refers to the category of companies called startups with a valuation of over a billion dollars. Hence, recycling unicorns are nothing but startups in the recycling sector that are worth over a billion dollars. It was venture capitalist Aileen Lee who first coined the term 'unicorn' for startups that broke the billion-dollar threshold and the reason he did so was that startups that are worth a billion dollars are as elusive as the mythical unicorn. And yet, there are over 200 unicorns around the ...
Read MoreHow to Get Fare Estimates for Uber Taxi's on Twitter?
Uber is a private car hire service which is one of the most taxi popular provider which presently operates in more than 500 cities worldwide. Everyone who wishes to use uber Taxi service is usually interested to know about how much will be the cost if they hire Uber taxi from one point to another. That’s simple, all you require to do is, type the command as to send it to @WhatTheFare and the bot would help you know approximately how much would be the fare in a minute or less.What is the Advantage?The bot, @WhatTheFare not only ...
Read MoreKey Points on Automation
Automation is one of the hot domain in the Information and Technology, which has become predominant topic of discussion among the IT professionals. In general, automation can be defined as the process of involving software robots or hardware robots to solve the human problems (requirements). Due to this automation, it is said that ¼th of the job will be lost in the market. But people still prefer automation for (top) 7 reasons, which is discussed in this article.Cost SavingsCost is one of the major factor in the software development cycle, which predominantly comes into picture right from the planning phase. ...
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