Accelerated depreciation is a method to calculate the book value of a fixed asset over the years. In this method, the relative asset incurred higher expenses than last remaining years, unlike straight-line method.
There are two methods two calculate accelerated depreciation i.e. double declining balance method and Sum of the years’ digits method.
Double declining balance method formula
Annual Depreciation Expenses = Net Book Value x 2/Useful life in years
Sum of the years’ digits method formula
Depreciation Expense = Remaining useful life of asset / Sum of the years digits x Depreciable Cost
Cloud accounting is widely accepted by small businesses. Cloud Accounting is termed as online accounting and manual accounting called as traditional accounting. Why we need cloud accounting? The best answer would be to save time, money and to reduce accounting errors. Also, cloud accounting is the best way to do accounting as you can save & edit all your data at any time and anywhere as data will be saved on server. These are some features which attract small businesses to use accounting software.
Accrued liabilities usually referred to those transactions which are incurred by an entity but yet not have been paid or receive an invoice.
There are two types of accrued liabilities i.e. short-term accrued liability and long-term accrued liability. Short term accrued liabilities are daily basis transactions which happen on a regular basis. Long-term accrued liabilities which happen very rarely but for a longer period of time.
Examples: Accrued wages, accrued pension liability, accrued interest on loan payable etc.
Financial accounting is the process of preparing financial reports for both internal and external use of a business. Financial report includes balance sheet, cash flow & income & expense, equity & liability statement.
This kind of report needs at the time of tax filing, company valuation etc.
Trial balance is a way of bookkeeping to ensure all ledger inputs are correct. In trail balance all credit balances entry under credit balance head and debit inputs under ledger balance head. If credit and debit balance found to be identical then we could conclude that there is no error in accounting entries.
Trail balance prepared in a regular period to minimise accounting error. In companies point of view, it’s an important task needs to do regularly. It would help to prepare company’s financial statements with zero error.
Factory overhead is also named as manufacturing overhead. Factory overhead cost is the total operational cost used for production or manufacturing in a factory. It’s not the direct cost associated with raw material and labor. Its also called an indirect cost.
Factory overhead includes in manufacturing cost category.
Bank reconciliation is a process of comparing company’s own financial record with bank record to maintain the accurate figure.
Bank reconciliation is very necessary as it helps to avoid any overdraft payments, duplicate charges etc. Double entry bookkeeping is one way to perform reconciliation. Bank reconciliation needs to be prepared for every month. Bank reconciliation is a way of finding errors in bank account and company’s ledger account.
Endowment fund is always held by a non-profit organization as invested capital in this fund need to use for only non-profit works. In endowment fund the principal amount must be retained and earnings from this fund only can use for operational works.
This fund integrated with non-profit organizations like collage, universities, NGO, hospitals, church etc.
It’s the period for which financial statements prepared of an entity. One accounting period consists of 12 months. This time period can be from January to December (calendar year) or April to March (Fiscal Year).
Accounting period varies according to type of business. For example, if a business set forth on February 12 then its first accounting period would be from February 12 to February 28/ 29.
Again, if a business shut down on March 25 then its final accounting period would be from March 1 to March 25. Accounting period pertain to only income and cash flow statements as balance sheet prepared on a specific date.
Dividend is the share of profits of a company / entity with shareholders. After paying to its creditors company can share some or whole profit with its shareholders. Company can also skip paying dividends if it needs funds for reinvestment or any other business work. Company also can decide the date and rate for dividend pay. Normally, dividend paid quarterly and monthly.
There are two types of account in accounting system, one is balance sheet account which carries remain balance to the next year and another one is profit & loss account which becomes zero at the end of each & every year.
Balance Sheet Account: Balance sheet account includes three ledger accounts i.e. asset, liability, capital/Equity.
Bill of supply is a type of invoice generated at the time of selling exempted goods or services exempted under GST by the seller. Businesses who registered under composition scheme can’t charge any tax sell by them, whereas a non-composite dealer also can’t charge any tax on exempted goods and services.
It occurs when a deposit amount in an account is lower than the withdraw amount in the form of a cheque. It’s a negative remark for the respective account also bank will charge for overdraft. The account balance goes below zero if overdraft happens.
This negative remark will affect the credit score of the respective bank account.
It’s the total cost of depreciation of an asset in a regular period of time till it exists. It shows the decreasing value of an asset over the period of time. Accumulated depreciation reflects in the balance sheet under accumulated account and this amount never ends at the end of a financial year, it carry forward to the next year.
We can calculate the depreciation amount in three different ways mentioned below:
Shareholder’s equity is an asset for shareholders. It total amount left after deducting total liabilities from total asset. It reflects the net worth of a company. Shareholders’ equity= Total Asset – Total liabilities
Annuity is an amount of fund invested by an individual or a financial institution in order to receive equal amount of money at equal time intervals. It can be defined as a fixed income source for an individual.
Input tax credit can be defined as the credit claimed by business owners on raw materials purchased for further production of output (service/product). Through this scheme, businesses will be able to reduce tax already paid on purchases.
Capital is the total financial asset of a business. It includes cash-in-hand, cash-at-bank, building, furniture, machinery, land etc. Capital is categorized into two different types i.e. working capital, fixed capital.
Working Capital: Those assets or capital used or available for day-to-day operations are called as working capital.
To calculate working capital: working capital = current assets – current liabilities
Fixed Capital: Capital or assets like furniture, machinery is termed as fixed capital. Fixed capital is the biggest advantage for a business as these can be used in bad times to pay debts.