Tags |
|
|
Links |
|
|
Actual for You - Characteristics of Depreciation, Basic Factors of Determination of Depreciation
Are you a distributor, reseller or wholesaler of goods? As a distributor, your biggest accomplishment – getting a very large order – can turn into a nightmare if you don’t have the financial resources to deliver it. Why? Because if you don’t fulfill the order, you risk losing your client.But there is a simple solution to this problem, and you won’t find it at your local bank. It’s called PO financing. PO financing provides you with the necessary financing to buy the goods from your suppliers, deliver them to your customers and close the sale.And you can use PO financing even if your company doesn’t have credit. How? By using your purchase order from a strong customer (or the government) as collateral. It’s an ideal tool that can help a company grow past its current financial limitations.Let examine a sample PO financing transaction. It usually has 6 steps:You get a PO from your clientThe po financing company pays your suppliers via a bank wire or letter of creditThe order is delivered to your client, who accepts it You invoice your clientYour client pays the invoice, concluding the orderThe transaction is settledAlthough PO financing is a great tool, it is not for everyone. Given the associated risks, most po financing companies will only financ
Annuity Method
The method recognizes the time value (Interest) of money and hence regards the real cost of using a long-lived asset equivalent to the actual amount invested thereon plus the interest lost on the acquisition of asset. Under this method, so much depreciation is written off each year as a
Laser machining technology uses high intensity laser beams of varying widths for a variety of applications such as slotting, cutting, and creating holes. It can be used in fabrication of different types of materials such as metals, plastics, vinyl, glass, marble, and graphite. Other materials that can be fabricated using laser machining include nylon, ceramics, carbon fiber, composites, soft rubber, and thin metal foils.Laser machining systems are used in conjunction with computer numeric control (CNC), which makes it ideal for use with thin walled tubing, boasting beam widths down to .0005'. In this process, the machining operator uses computers to control machine tools for manufacturing complex and intricate parts in metal and other materials.A laser machining process involves the use of conventional as well as fiber optic beam delivery systems, which allow precision positioning while cutting metal or other materials. It is used to cut burr-free parts that are required in a number of industries such as aerospace, automobile, shipping, and others. The process is fast, efficient, and can be repeated any number of times depending on production volumes. It is used to create grooves that are cut to a specific depth with one pass of a laser beam without severing any material from the work piece.Laser machining is used for pr
Depreciation has the following characteristics:
(1) Depreciation is charged in case of fixed assets only, e.g., Building, Plant and Machinery, Furniture 'etc. There is no question of depreciation in case of current assets-such as Stock, Debtors, Bills Receivable etc.
(2) Depreciation causes perpetual, gradual and continuous fall in the value of asset
(3) Depreciation occurs till the last day of the estimated working life of asset
(4) Depreciation occurs on account of use of asset In certain cases, however, depreciation may occur even if the assets are not used, e.g., Leasehold Property, Patent right, Copyright etc.
(5) Depreciation is a charge against revenue of an accounting period.
(6) Depreciation does not depend on fluctuations in market value of asset
(7) The amount of depreciation of an accounting year cannot be determined precisely-it has to be estimated. In certain cases, however, it may be ascertained exactly, e.g., Leasehold Property, Patent Right, Copyright etc.
(8) Total depreciation of an asset cannot exceed its depreciable value (cost less scrap value).
Basic factors of determination of depreciation
(1) original cost of fixed asset i.e., purchase price plus freight and installation expenses;
(2) estimated amount of expenditure on repairs during the useful life;
(3) estimated useful life of asset after which it will be discarded;
(4) estimated residual or scrap value;
(5) interest on investment-the amount invested on purchase of asset, if it had been invested in some other investment what interest would have been earned;
(6) possibility of obsolescence.
Fixed Installment or Original Cost or Straight Line Method, reducing/Diminishing Balance method
Under this method depreciation is not calculated on cost of asset. It is computed on the book value. of asset. The book value of the asset is obtained by deducting depreciation from its cost. The book value of asset gradually reduces on account of depreciation charge. Since the depreciation percent rate is applied on reducing balance of asset. this method is called reducing balance or diminishing installment method or written down value method.
Merits and demerits.
Declining balance method not only equitably matches depreciation expenses against the related revenue but also fairly spreads. the incidence of depreciation and repairs (viz higher depreciation but heavier repairs in later years.) on profit and loss account over the assets life span. Elimination of major portion of cost in early years also minimizes the impact of obsolescence. It is equally useful to management as accelerated depreciation means smaller taxable profits and taxes hence lesser outflow of cash.
Accelerated Depreciation Methods
Sum-of-the year's digits (SYD). This method of depreciation accelerates depreciation expenses so that the amount recognized in the earlier periods of an asset's useful life are greater than those recognized in the latter periods. The SYD is found by estimating an asset's useful life in years, then assigning consecutive numbers to each year, and totaling these numbers. For n years, SYD = 1 + 2 + 3 + 4 + ... +n
Annuity Method
The method recognizes the time value (Interest) of money and hence regards the real cost of using a long-lived asset equivalent to the actual amount invested thereon plus the interest lost on the acquisition of asset. Under this method, so much depreciation is written off each year as af
About 98% of all the work done inside of a medical billing program involves data entry. Medical billing databases can reach massive proportions. A company with thousands of clients can have databases that are tens of gigabytes in size. Unfortunately, as databases grow, so do the problems. We'll discuss some of the more common data entry and database problems and how to fix them or even avoid them, when possible.One of the main causes of database problems is with the data entry personnel themselves. Each database program has a certain level of tolerance. Some are more tolerant than others. Those that are less forgiving can come to an abrupt halt when a data entry person types in data that is invalid. We're not talking about typing in a wrong address. We're talking about typing in alphanumeric characters in a numeric field. Most well made programs won't allow this to happen. But the ones that do invite serious trouble because this invalid data can corrupt a database, especially if it happens often. At the very least, the program reading the data will get so confused that it will cease to operate correctly.The best way to avoid this problem is to train data entry personnel properly. Of course, it helps to spend the few extra bucks to get a program that is more forgiving of invalid data or, better yet, a program that w
(6) Depreciation does not depend on fluctuations in market value of asset
(7) The amount of depreciation of an accounting year cannot be determined precisely-it has to be estimated. In certain cases, however, it may be ascertained exactly, e.g., Leasehold Property, Patent Right, Copyright etc.
(8) Total depreciation of an asset cannot exceed its depreciable value (cost less scrap value).
Basic factors of determination of depreciation
(1) original cost of fixed asset i.e., purchase price plus freight and installation expenses;
(2) estimated amount of expenditure on repairs during the useful life;
(3) estimated useful life of asset after which it will be discarded;
(4) estimated residual or scrap value;
(5) interest on investment-the amount invested on purchase of asset, if it had been invested in some other investment what interest would have been earned;
(6) possibility of obsolescence.
Fixed Installment or Original Cost or Straight Line Method, reducing/Diminishing Balance method
Under this method depreciation is not calculated on cost of asset. It is computed on the book value. of asset. The book value of the asset is obtained by deducting depreciation from its cost. The book value of asset gradually reduces on account of depreciation charge. Since the depreciation percent rate is applied on reducing balance of asset. this method is called reducing balance or diminishing installment method or written down value method.
Merits and demerits.
Declining balance method not only equitably matches depreciation expenses against the related revenue but also fairly spreads. the incidence of depreciation and repairs (viz higher depreciation but heavier repairs in later years.) on profit and loss account over the assets life span. Elimination of major portion of cost in early years also minimizes the impact of obsolescence. It is equally useful to management as accelerated depreciation means smaller taxable profits and taxes hence lesser outflow of cash.
Accelerated Depreciation Methods
Sum-of-the year's digits (SYD). This method of depreciation accelerates depreciation expenses so that the amount recognized in the earlier periods of an asset's useful life are greater than those recognized in the latter periods. The SYD is found by estimating an asset's useful life in years, then assigning consecutive numbers to each year, and totaling these numbers. For n years, SYD = 1 + 2 + 3 + 4 + ... +n
Annuity Method
The method recognizes the time value (Interest) of money and hence regards the real cost of using a long-lived asset equivalent to the actual amount invested thereon plus the interest lost on the acquisition of asset. Under this method, so much depreciation is written off each year as a
Kitchens are one of the busiest parts of the house. Many things go on in the kitchen and this is why it’s often the dirtiest, most abused and most in need of repair in the whole house. If you’re planning on investing in an fixer-upper, be sure that one of your top priorities will be renovating the kitchen.How Do You Plan on Marketing the House?Before you touch even one object or take one brick out of the kitchen, consider first how you plan on marketing the house. Consider the house’s size. Consider the neighborhood. Is it more suited to become a family home, an apartment or a bachelor’s pad? The answer to this question will enable you to learn as well what type of kitchen would be best to use or create.A bachelor’s pad, for instance, would only need a simple but functional kitchen – if the kitchen area is too big, you should consider making the area smaller if your budget allows.A family home, however, would need lots and lots of space in the kitchen because this is one of the communal spots of the house and where everybody gathers for some quality family time.How Much Are You Willing and Able to Spend?Keep in mind that those questions are completely different but you have to reach a compromise between the answers to both questions. It’s more difficult to save money when redesigning or renovating a
(4) estimated residual or scrap value;
(5) interest on investment-the amount invested on purchase of asset, if it had been invested in some other investment what interest would have been earned;
(6) possibility of obsolescence.
Fixed Installment or Original Cost or Straight Line Method, reducing/Diminishing Balance method
Under this method depreciation is not calculated on cost of asset. It is computed on the book value. of asset. The book value of the asset is obtained by deducting depreciation from its cost. The book value of asset gradually reduces on account of depreciation charge. Since the depreciation percent rate is applied on reducing balance of asset. this method is called reducing balance or diminishing installment method or written down value method.
Merits and demerits.
Declining balance method not only equitably matches depreciation expenses against the related revenue but also fairly spreads. the incidence of depreciation and repairs (viz higher depreciation but heavier repairs in later years.) on profit and loss account over the assets life span. Elimination of major portion of cost in early years also minimizes the impact of obsolescence. It is equally useful to management as accelerated depreciation means smaller taxable profits and taxes hence lesser outflow of cash.
Accelerated Depreciation Methods
Sum-of-the year's digits (SYD). This method of depreciation accelerates depreciation expenses so that the amount recognized in the earlier periods of an asset's useful life are greater than those recognized in the latter periods. The SYD is found by estimating an asset's useful life in years, then assigning consecutive numbers to each year, and totaling these numbers. For n years, SYD = 1 + 2 + 3 + 4 + ... +n
Annuity Method
The method recognizes the time value (Interest) of money and hence regards the real cost of using a long-lived asset equivalent to the actual amount invested thereon plus the interest lost on the acquisition of asset. Under this method, so much depreciation is written off each year as a
The History of Hand Held Terminals in RestaurantsThe desire for restaurant hand held terminals and wireless restaurant software has been around since the invention of the electronic cash registers in the 1980's. When restaurateurs saw the power of the electronic cash register how it stored and recalled orders, how it dispersed orders to various kitchen and preparation printers and how it helped control the flow of the restaurant the desire to have this power in the palm of your hand has been there. It is only recently that technology caught up to the demand.In the 1990's a couple of companies introduced hand held terminals to restaurants with limited success. Displays were small and therefore limited menu items. Battery life was short and limited use. But the demand was still there because the tremendous benefits to the restaurant owner.I distinctly remember a trip to an NFL game where the stadium food provider used Seiko hand held terminals to take orders from customers sitting in their seats. I was about 6 seats from the aisle and placed an order for a drink and a hot dog fixed the way I wanted. The server took the order, told me the total and I passed the money down to her. As I was receiving my change my food arrived from the kitchen! Now THAT is service.Most recently, restaurant software comp
Merits and demerits.
Declining balance method not only equitably matches depreciation expenses against the related revenue but also fairly spreads. the incidence of depreciation and repairs (viz higher depreciation but heavier repairs in later years.) on profit and loss account over the assets life span. Elimination of major portion of cost in early years also minimizes the impact of obsolescence. It is equally useful to management as accelerated depreciation means smaller taxable profits and taxes hence lesser outflow of cash.
Accelerated Depreciation Methods
Sum-of-the year's digits (SYD). This method of depreciation accelerates depreciation expenses so that the amount recognized in the earlier periods of an asset's useful life are greater than those recognized in the latter periods. The SYD is found by estimating an asset's useful life in years, then assigning consecutive numbers to each year, and totaling these numbers. For n years, SYD = 1 + 2 + 3 + 4 + ... +n
Annuity Method
The method recognizes the time value (Interest) of money and hence regards the real cost of using a long-lived asset equivalent to the actual amount invested thereon plus the interest lost on the acquisition of asset. Under this method, so much depreciation is written off each year as a
If you are looking start a business selling metal detectors you need some knowledge on the subject to make sure that your customers feel comfortable purchasing from you. If you are already knowledgeable about metal detectors than starting your own business and watching the profits come in should happen sooner rather than later.Selling metal detectors can be extremely profitable and you can sell new, used, and metal detecting accessories. There are many people out there that are passionate about the hobby of metal detecting. In this article we will take a look at your possible customer base and how to find new ones.If you want to sell metal detectors in larger quantities you may want to get in touch with many of the metal detecting clubs that are located in your area. Offer a discount to the club members so that they will get into your store and want to find a good deal. You may not make as much profit at first but the word of mouth and loyal customers will continue to grow. When the members are in your store they will want to take advantage of the discounts and purchase some more of the higher profit items such as accessories.When starting a metal detecting business you will want to carry new metal detectors and you will need to contact the manufacturers that make the metal detectors. Find out if they have any co-op adve
Annuity Method
The method recognizes the time value (Interest) of money and hence regards the real cost of using a long-lived asset equivalent to the actual amount invested thereon plus the interest lost on the acquisition of asset. Under this method, so much depreciation is written off each year as after debiting the asset account with interest upon the diminishing value, will reduce the asset to nil at the end of its life. Thus, the amount written off as depreciation is the same every year, but the interest will diminish each year.
The amount of annual depreciation to be written off by Annuity method will be ascertained from Annuity Tables
Depreciation Fund method or Sinking Fund method
Under this method, a fixed amount is charged as depreciation every year. It endeavors to provide the required lump sum cash at the retirement of a long, lived asset by annually setting aside and investing a fixed sum in readily realizable securities. These securities earn interest at fixed rate and the same being reinvested along with successive fixed installments of depreciation, allowed to accumulate at compound interest. The sinking fund method thus takes into account of this probable income from interest while fixing the annual depreciation and investing the same which together with compound interest accumulated to the asset's depreciable cost by the end of its useful life. Obviously, the fixed installment of annual depreciation is here smaller as compared to straight line method. Its magnitude, however, rests on the asset's life span and interest rate. Longer the span and higher the rate, smaller is the annual depreciation per rupee of depreciable cost.
Shortcomings of Depreciation Fund Method
Depreciation fund method assumes constant rate of return on every periodic investment in identical securities. This is hardly true in this dynamic world where rates do vary now and then. Any variation in the rate of return upsets the earlier periodic allocation for depreciation and entails refection thereof. Further the amount realized on the sale of security rarely agrees with its acquisition cost owing to made fluctuations which may be both erratic and considerable. Those may cause a wide gap between the required and supplied cash.
Insurance Policy Method
This method endeavors the supply of required cash at the retirement of a specified asset in return of periodic contribution (premium). Under this a trader takes a 'Capital Redemption Insurance Policy' from an insurance company which undertakes to pay at a given date a certain sum if the trader, paying a fixed number of premiums after regular intervals. The trader treats the periodic payment as depreciation and charges it to profit and loss account. In this case, depreciation is charged at the end of the year, whereas, the premium is paid at the beginning of the year. At maturity, the insurance company pays the policy money which is normally sufficient to replace the retired set. Normally, amount received is more than total premium paid as the policy yields interest.
Revaluation Method
Under the system, each year the asset is valued and the value is compared with tha
HTTP = HTML link (for blogs, profiles,phorums):
<a href="http://www.actual4u.com/article/5269/actual4u-Characteristics-of-Depreciation-Basic-Factors-of-Determination-of-Depreciation.html">Characteristics of Depreciation, Basic Factors of Determination of Depreciation</a>
BB link (for phorums):
[url=http://www.actual4u.com/article/5269/actual4u-Characteristics-of-Depreciation-Basic-Factors-of-Determination-of-Depreciation.html]Characteristics of Depreciation, Basic Factors of Determination of Depreciation[/url]
Related Articles:
HAZWOPER - Understanding the Standard
Benefits of a Merchant Account for Your Business
Why Choosing Vending Machine Business?
Bookmark it:
|