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Item Upon - Characteristics of Depreciation, Basic Factors of Determination of Depreciation
An expense report is the statement covering all the expenses of official or personal travel of an employee that is to be submitted to the employer for the purpose of reimbursement. Expense reports also serve the purpose of personal record of the expenses or for accounting and tax payment preparation. The expenses generally include air/train fare, hotel accommodations, food expenditures and other travel-related expenses. Often, the employees take too much time for the submission of expense report, but the process should be quick. The process of expense reporting can be made simple and quick only through automation with web-based expense report management software like Expense Management Automation (EMA) and Ceridian Expense Manager.With these programs, the employee submits the report online to the approval authority and faxes the receipts. Almost all the companies are following this method of automation so that employees can avoid the errors involved in manual entry and submission of reports. The fast submission of expense report leads to quick reimbursement, which in turn provides visibility and control for the compliance of the standards of audit and accounting. As it shortens the reimbursement cycle, employees’ motivation and thereby operational efficiency increases.Every organization should have a standard format of employee
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
What is a commodity? According to the Webster Dictionary the word commodity is defined as a a good or service whose wide availability typically leads to smaller profit margins and diminishes the importance of factors (as brand name) other than price.In a commodity market, many companies compete and none enjoys a competitive advantage. Meaning, that each firm has equal access to such necessities as technologies, capital, clients, and labor. For example, a financial service firm that sell stock. Let’s face, all stock is the same. If I buy Microsoft (MSFT) stock from E*Trade, it that same MSFT stock that Merrill Lynch sell. Therefore, the product is the same. With that being said, how to a financial firm differentiate themselves from other financial firms? Currently these firms separate themselves by selling advice, research and create mutual funds that exclusive their firm.If you cannot maneuver your competition, because they are consistently imitating your every move, then you must either improve your efficiency by doing the job fast and/or cheaper than your competitors. You start by analyzing the relative strengths of your competitive environment:Current Customers – Are you getting the most out of every customer? Can you earn a higher profit margin by offer your clients’ upgrades to their current products/servi
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 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
There are several legal complications involved in mergers and acquisitions. It is advisable to hire a lawyer for mergers or acquisitions. Lawfully binding contracts and agreements have a lot of terminology that people may not understand. Lawyers have requisite knowledge that can help people understand their rights in relation to the merger or acquisitions. This may save a lot of time and legal complications. Lawyers are in a better position to evaluate the deal and recommend whether a particular merger or acquisition is best suited to the client's needs.To find experienced and reputed lawyers for mergers and acquisitions, people need to do some comparison-shopping. They can research online, ask friends for suggestions or else find lawyers that specialize in mergers and acquisitions. The profile of the lawyer to be hired may give the client a fair idea about the experience in the field of mergers and acquisition. Some firms specialize in such areas. It is advisable to hire from such firms.Sometimes a group of lawyers may be required to handle the case. Some may work on it individually or have other members of the law firm handle all or part of it. In such cases, the payment may differ from hiring an individual. The time taken for the procedure could also decide terms of payment.The mode of payment towards various servic
(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 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
You are excited, it's a new business day! You glance at your business plan on the pin board in front of you. A shiver of excitement races up your spine as you think of your business potential. Just 8 hours a day on this plan will mean a better life for you and your family, all within 2 years. Then the phone rings…It's a customer! They are enquiring about that widget they bought from you yesterday.Will it do x and y?So you explain that it will do x and y. And because you are focused on providing the ultimate customer service, you talk them through the steps on the phone. After all you need to go the extra mile, don't you?You hang up and think "Another satisfied customer, but I wished they had read the owners manual before calling me!" You glance at your watch, then look at your diary and realize you are an hour behind schedule. Then there is a knock on the door…Sound like your typical day? Full of unscheduled interruptions, and at the end of the day wondering where all the time has gone? You only managed to complete 10% of the stuff on your to-do list today?So do you take yesterday's unfinished business and add it to today's business? Or just cross it off in your diary and try and catch up next week?It's easy to get overwhelmed when this happens! The important stuff never gets done because you
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 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
Over the last couple years, we have been working with Healthcare organizations to adapt Lean to their complex processes in laboratory and hospital environments. Predictably, there was much skepticism from Clinicians and administrators alike - and rightly so. They were perfectly justified in asking - 'how does a thinking that grew mainly out of the automotive industry apply to the healthcare environment?'The answer is, 'it applies perfectly'.But giving an answer like that does not (and should not) convince all healthcare providers to blindly accept Lean and charge forward in the process transformation.It took a few very courageous and visionary leaders to step forward and attempt applications within their environments - even if they were still a little (or a lot) skeptical.Within a matter of a few weeks, the skepticism faded and the results began to appear. It works! And who would have believed that in a scientific profession there would be such a vast amount of opportunity to remove 'non-value' or waste.The 'non-value' activities were not the people trying to do something wrong. In fact, the people were just working at trying to provide the best service, both in quality and turnaround time. The barrier was the existing 'system'. It forced them to do things, which actually hindered them from providing their
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 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
There are a variety of options open to you for air transport. You will find that these options are very versatile in several ways. They all use the principals of flying but they also allow for some of the most amazing types of air transport out there. Getting around has never been grander and more and more people are taking advantage of flying in various air transport mechanisms.While just a decade ago many people would tell you that they had not had the opportunity to be in any sort of air transport, now they will tell you differently. Air transport has become an important part of life and life’s adventures.Air transport is capable of many things. While we think of airplanes as transportation for people to get back and forth, we also know that it is a way of flying all sorts of equipment and supplies from place to place as well. But, do you realize the large part that air transport plays in protection? What about in health related cases when air transport is the only way to get the patient to the doctor in time to save his or her life? Do you realize the importance of air transport in military expeditions? In fact, air transport is necessary for trade from country to country over huge seas of water as well.But, for the most part, people think of airplanes as their main use of air transport during their lives.
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 that in the beginning of the year. The fall is treated as depreciation. Suppose if the value of the tools at the beginning of the year was Rs. 8,000, during the year tools worth Rs. 6,000 were purchased and at the end of the year, on valuation these amounted to Rs. 11,000. The amount of depreciation for the year will be : 8,000 + 6,000-11,000 = Rs. 3,000 . This method is useful for charging depreciation on livestock and loose tools.
Depletion Method
Natural resources include physical assets like mineral deposits, oil and gas resources and timber stands. These natural resources get exhausted by exploitation. In some cases, the reduction in physical deposits is offset by growth or development of additional deposits.
The cost of natural resources is the price paid for its acquisition plus price paid for development of such asset in order to bring it to a state suitable for production.
The periodic depletion is better not calculated in terms of year. Rather it is better to calculate the cost per unit and then multiply the cost of unit to units produced in that particular year.
Machine Hour Rate
Under this method, the total number of working hours of a machine during the whole of its effective life is estimated, and then the cost of machine is divided by the expected number of hours of useful life, this gives the rate pe
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