We are looking at the word depreciation. Depreciation is the spreading out the original cost over the estimated life of a fixed asset such as a plant and equipment. There are three common used methods in depreciation: 1.) straight-line depreciation; 2.) accelerated depreciation; and 3.) double declining balance. When a company purchases an asset such as plant and equipment, there is a decline in economic potential of limited life assets originating from wear and tear. This
Last week, we discussed on how to record a payment on a claim. We looked at a scenario of when your building caught on fire, and you loss all of your inventory. We booked a 100% value of your inventory, and then we booked a loss on your inventory. Today, allow me discuss on how to record a loss of your delivery vehicle when accumulated depreciation is applied. You bought your delivery vehicle for $25,000. You expect the useful life of your delivery vehicle to last five yea
This week we are looking at the word Fixed Asset-To-Equity Capital ratio. This is a computation that indicates whether or not a company has the ability to satisfy long-term debt. A ratio of greater than one means that some of the fixed assets that are owned are financed by debt. One of the services that you receive from A & C Bookkeeping Services is a ratio analysis. Please reach out to us and we will be happy to serve you.
One of the risks of having a business, is a chance for a business to have to file a claim with their insurance carrier. Let’s discuss a couple of scenarios. Scenario 1: If you owned a retail store, and one night you received a call from your local Sherif’s department to let you know that your store is engulfed in flames. In your store, you have $500,000 in inventory. Now, as a business owner, more than likely you will have enough total insurable value (TIV) insurance in pla
This week we will be looking at the accounting word nonrecurring. Nonrecurring is an income statement event that is either unusual or infrequent in occurrence. An example of such of an item is a gain or loss of a fixed asset. This item is shown as before arriving at income before continuing operations. It does not show with a tax or has an earning per share effect.
Today, we will be looking at two forms of leases. 1. An operating lease is rental of property between the lessee and lessor for a fee. 2. A capital lease is in which the lessee obtains significant property rights. A capital lease exists if any one of the following four criteria is met: (1) the lease transfer ownership of the property to the lessee at the end of the lease terms; (2) a bargain purchase option exists; (3) lease term is 75% or more of the life of the property; (4