Disposal of assets meaning When the assets become obsolete due to change in technology or fashion or due to end of life. The assets should be disposed, which is the disposal of assets. While disposing of the assets there may be gain or loss or company may dispose of it at scrap value. The journal … Read more
Definition of units of production method or Production run method The production run method is also known as units of production method or units of output method. Under this method, the depreciation rate is estimated based on the total estimated output. Then, annual depreciation is calculated to multiply the depreciation rate by units of production … Read more
Definition of double declining balance method of depreciation The double declining balance method of depreciation also called accelerated depreciation method. In this depreciation method first fall the straight-line depreciation rate is determined, just dividing the original cost by its life. It means the scrap value is ignored while calculating the rate of depreciation. The depreciation … Read more
Definition of reducing balance method or Declining balance method of depreciation In this reducing balance method of depreciation, depreciation is charged on the assets based on the reduction value of the assets. A fixed percentage (%) of a depreciation rate is assigned on the reduced value of the assets. The depreciation value/ amount in the … Read more
What is Straight Line Method of Depreciation? A straight-line method of depreciation requires a fixed amount of depreciation to be charged on the assets every year. This method is also called the original cost method, fixed installment method, equal installment method. The depreciation is calculated on the original cost of the assets. The original cost … Read more
Acquisition cost definition Generally the cost of invoice or payment made to the supplier for purchasing the asset considered as acquisition cost. In accounting, however, all the cost incurred to bring the assets in the business location and other expenditures which are incurred in order to set of the assets are also treated as acquisition … Read more
Definition and difference between capital expenditure and revenue expenditure A business incurs several expenditures during the year some of them are recurring in nature whereas others are non-recurring in nature. The non-recurring expenditure and recurring expenditure respectively, are called capital expenditure and revenue expenditure. Capital expenditures are treated as assets whereas revenue expenditures are immediately … Read more
What is Notes Receivable? The notes receivable is a return promise by the buyer to repay a certain due amount to the seller within a certain time period. A note receivable is a written agreement between the maker and payee. It is also used to finance short-term funds to clients or customers. The notes receivable … Read more
Aging Accounts Receivable Method Under the aging accounts receivable method, the uncollectible expense amount is determined based on the age of the account receivable. The accounts receivable which are old have a greater chance of being bad debt. The probability is distributed among the account receivables depending often their ages. In general, the longer an … Read more
Percentage of Credit Sales Method Some companies estimate their bad debts as a percentage of credit sales. The percentage of credit sales method estimates bad debt expense or uncollectible expense on the basis of the percentage of net credit sales. In other words, under this approach or method, the allowance amount at the end of … Read more