Accounting Tools

APRIL 17, 2024

What is the Retirement Method of Depreciation? The retirement method of depreciation involves waiting until a fixed asset is retired from service before charging its cost to depreciation. When depreciation is eventually recognized , the amount is net of any salvage value of the asset.

Auditing 40

Auditing Accounting Accounting 40

Accounting Tools

JUNE 20, 2023

Related Courses Fixed Asset Accounting How to Audit Fixed Assets Depreciation is a fixed cost , because it recurs in the same amount per period throughout the useful life of an asset. Depreciation cannot be considered a variable cost , since it does not vary with activity volume. Is Depreciation an Operating Expense?

Auditing 75

Auditing Accounting Accounting 75

Accounting Tools

NOVEMBER 2, 2023

Related Courses Fixed Asset Accounting How to Audit Fixed Assets What are the Causes of Depreciation? Depreciation is a ratable reduction in the carrying amount of a fixed asset. But why do we need depreciation at all? The causes of depreciation are noted below. The causes of depreciation are noted below.

Auditing 75

Auditing Accounting Accounting 75

Accounting Tools

MAY 13, 2024

What is a Fully Depreciated Asset? A fixed asset is fully depreciated when its original recorded cost, less any salvage value , matches its total accumulated depreciation. Thus, full depreciation can occur over time, or all at once through an impairment charge. No additional depreciation is required for the asset.

Accounting 40

Accounting Accounting Financial Statements Expense Reports 40

Accounting Tools

OCTOBER 27, 2023

Accounts Receivable Window Dressing Record an unusually low bad debt expense , so that the accounts receivable (and therefore the current ratio ) figure looks better than is really the case. Capitalization Window Dressing Capitalize smaller expenditures that would normally be charged to expense , to increase reported profits.

Accounting 75

Accounting Accounting Financial Statements Accounts Receivable 75

Accounting Tools

FEBRUARY 12, 2024

What are Operating Expenses? Operating expenses are those expenditures that a business incurs to engage in activities not directly associated with the production of goods or services. These expenditures are the same as selling, general and administrative expenses. Compensation for production personnel.

Financial Statements 75

Financial Statements Tax Payroll Accounting 75

Accounting Tools

OCTOBER 20, 2023

If these improvements have a useful life , they should be depreciated. If there is no way to estimate a useful life, then do not depreciate the cost of the improvements. They are not depreciated. Also, note that land is not depreciated, since it does not have a useful life. Why Land is Not Depreciated

Accounting 74

Accounting Accounting Auditing 74

Accounting Tools

APRIL 17, 2024

For example, the Internal Revenue Service may mandate that a specific depreciation period be used for a fixed asset , while the internal accounting policies of a business dictate the use of a different number of periods. The accountant uses a different depreciation approach when developing financial statements for tax purposes.

Tax 40

Tax Financial Reporting Reconciling Financial Statements 40

Accounting Tools

MAY 13, 2024

The working ratio compares the operating expenses of a business to its revenue. The ratio reveals whether a company can at least recover its operating expenses from sales. The ratio does not include any financing costs, which may form a substantial part of total expenses. What is the Working Ratio? Uses the wrong baseline.

Financial Statements 40

Financial Statements Accounting Accounting 40

Accounting Tools

JANUARY 26, 2024

The matching principle requires that revenues and any related expenses be recognized together in the same reporting period. Thus, if there is a cause-and-effect relationship between revenue and certain expenses, then record them at the same time. If there is no cause-and-effect relationship, then charge the cost to expense at once.

Accruals 75

Accruals Bookkeeping Financial Statements Invoicing 75

Accounting Tools

OCTOBER 23, 2023

Related Courses Bookkeeping Guidebook Cost Accounting Fundamentals The difference between cost and expense is that cost identifies an expenditure , while expense refers to the consumption of the item acquired. Unfortunately, cost and expense tend to be used interchangeably even within the accounting terminology.

Cost Accounting 75

Cost Accounting Bookkeeping Billing Financial Accounting 75

Accounting Tools

OCTOBER 6, 2023

Accumulated depreciation. One account is generally used to compile the accumulated depreciation for all types of fixed assets. Accrued expenses. Expenses Cost of goods sold. Rent expense. Utilities expense. Travel and entertainment expense. Advertising expense. Depreciation expense.

Accounting 75

Accounting Accounting Bookkeeping Accounts Payable 75

Accounting Tools

JUNE 19, 2023

Amortization is the process of incrementally charging the cost of an asset to expense over its expected period of use, which shifts the asset from the balance sheet to the income statement. Similarly, depletion is associated with charging the cost of natural resources to expense over their usage period.

Auditing 75

Auditing Accounting Accounting 75

Accounting Tools

DECEMBER 23, 2023

What is an Expense? An expense is the cost incurred in order to generate revenue or obtain something. An alternative definition is that an expense is the reduction in value of an asset as it is used to generate revenue. Debit to expense, credit to accounts payable. Debit to expense, credit to asset account.

Accruals 75

Accruals Bookkeeping Accounts Payable Accounts Payable 75

Accounting Tools

APRIL 12, 2024

What is Depreciation Basis? Depreciation basis is the amount of a fixed asset's cost that can be depreciated over time. If so, they assume that there will be no salvage value, in which case the depreciation basis of an asset is the same as its cost.

Auditing 40

Auditing Tax Accounting Accounting 40

Accounting Tools

JULY 18, 2023

When setting up or adjusting a bad debt reserve , debit bad debt expense and credit the allowance for doubtful accounts. Example Expense Journal Entries Accounts payable entry. When recording an account payable , debit the asset or expense account to which a purchase relates and credit the accounts payable account.

Petty cash 75

Petty cash Accounts Payable Accounts Payable Payroll 75

Accounting Tools

JANUARY 21, 2024

What is Depreciable Cost? Depreciable cost is the combined purchase and installation cost of a fixed asset , minus its estimated salvage value. Depreciable cost is used as the basis for the periodic depreciation of an asset. Overview of Depreciation The Purpose of Depreciation

Auditing 40

Auditing Accounting Accounting 40

Accounting Tools

APRIL 18, 2024

Items grouped within a class are typically depreciated using a common depreciation calculation. Many items grouped into a PP&E class are assigned the same useful life for depreciation purposes. Once an asset has been recorded, it is depreciated over its useful life.

Computation 40

Computation Auditing Tax Accounting 40

Accounting Tools

APRIL 6, 2024

The concept is used to determine the amount of extraction cost that can be charged to expense. At a cost of $1,250 per ton of ore, International can charge $312,500 of its invested cost to expense in the current reporting period. Cost depletion is a method for allocating the cost of natural resource extraction to the units produced.

Tax 40

Tax Accounting Accounting Cost Accounting 40

Accounting Tools

JUNE 20, 2023

Note: The lease accounting noted in this article changed with the release of Accounting Standards Update 2016-02, which is now in effect. As the company receives lease invoices from the lessor, record a portion of each invoice as interest expense and use the remainder to reduce the balance in the capital lease liability account.

Accounting 75

Accounting Accounting Accounts Payable Accounts Payable 75

Accounting Tools

DECEMBER 23, 2023

What is the Appraisal Method of Depreciation? Under the appraisal method of depreciation, depreciation is calculated as the decline in the appraised value of an asset from the beginning to the end of a reporting period. If there is no decline in the appraised value during the period, then no depreciation is charged to expense.

Auditing 40

Auditing Accounting Accounting 40

Counto

FEBRUARY 4, 2024

Business Expenses and Tax Deductions for Singapore Companies Running a business in Singapore involves various expenses, from daily operational expenses to capital investments. Understanding which of these expenses are tax-deductible can significantly impact your business’s financial health.

Tax 52

Tax Payroll Accounting Accounting 52

Accounting Tools

JULY 31, 2023

Capitalization is the recordation of a cost as an asset , rather than an expense. For example, office supplies are expected to be consumed in the near future, so they are charged to expense at once. The specific dollar amount below which items are automatically charged to expense is called the capitalization limit , or cap limit.

Record Keeping 75

Record Keeping Financial Statements Computation Budgeting 75

Accounting Tools

NOVEMBER 7, 2023

It charges the sales tax to expense in the current period, along with the cost of the items purchased. Over time, the company gradually depreciates the asset, so that the sales tax is eventually charged to expense in the form of depreciation.

Tax 75

Tax Collections Accounting Accounting 75

Accounting Tools

OCTOBER 7, 2023

Related Courses Accountants’ Guidebook Bookkeeping Guidebook Cost Accounting Fundamentals What is a Deferred Expense? A deferred expense is a cost that has already been incurred, but which has not yet been consumed. Instead, charge these items to expense immediately, as long as there is no material effect on the financial statements.

Financial Statements 75

Financial Statements Cost Accounting Financial Reporting Accounting Software 75

Accounting Tools

MARCH 1, 2024

The reason for the difference is that tax rules may accelerate or delay the recognition of certain expenses that would normally be recognized in a reporting period. Expenses or losses that are tax deductible either prior to or after they are recognized in the financial statements. Calculate the total income tax expense in the period.

Tax 75

Tax Accounting Accounting Financial Statements 75

Accounting Tools

JULY 13, 2023

Revenue expenditures are for costs that are related to specific revenue transactions or operating periods, such as the cost of goods sold or repairs and maintenance expense. Timing Differences Capital expenditures are charged to expense gradually via depreciation , and over a long period of time.

Computation 75

Computation Bookkeeping Budgeting Tax 75

Accounting Tools

OCTOBER 20, 2023

Related Courses Fixed Asset Accounting How to Audit Fixed Assets Accounting for the sale of land differs from the accounting for the sale of any other type of fixed asset , because there is no accumulated depreciation expense to remove from the accounting records. Why Land is Not Depreciated

General Ledger 75

General Ledger Accounting Accounting Auditing 75

Accounting Tools

NOVEMBER 5, 2023

Related Courses Fixed Asset Accounting How to Audit Fixed Assets Depreciation cost is the amount of a fixed asset that has been charged to expense through a periodic depreciation charge. The amount of this expense is theoretically intended to reflect the to-date consumption of the asset. Is Depreciation a Source of Funds?

Auditing 40

Auditing Accounting Accounting 40

Accounting Tools

AUGUST 4, 2023

Asset Depreciation The amount of this asset is gradually reduced over time with ongoing depreciation entries. This yields a monthly depreciation charge, for which the entry is a debit to depreciation expense and a credit to accumulated depreciation.

Accounting 76

Accounting Accounting Accounts Payable Accounts Payable 76

Accounting Tools

JUNE 21, 2023

If an expenditure does not have such utility, it is instead considered an expense. This expenditure covers something (electricity) that only had utility during the billing period, which is a past period; therefore, it is recorded as an expense. An example of the first case is a building, which may be depreciated over many years.

Bookkeeping 75

Bookkeeping Billing Accounts Receivable Accounts Receivable 75

Accounting Tools

APRIL 9, 2024

What is Repairs and Maintenance Expense? Repairs and maintenance expense is the cost incurred to ensure that an asset continues to operate. Example of Repairs and Maintenance Expense Regional Transport operates a tramp steamer that operates down the east coast of the United States. Dry-dock maintenance.

Accounting 40

Accounting Accounting 40

Accounting Tools

SEPTEMBER 1, 2023

Related Courses Fixed Asset Accounting How to Audit Fixed Assets What is Depreciation Expense? Depreciation expense is that portion of a fixed asset that has been considered consumed in the current period. This amount is then charged to expense.

Auditing 40

Auditing Accounting Accounting 40

Accounting Tools

OCTOBER 6, 2023

Related Courses Fixed Asset Accounting How to Audit Fixed Assets What is Depreciation? Depreciation is a planned, gradual reduction in the recorded value of an asset over its useful life by charging it to expense. Depreciation is applied to fixed assets , which generally experience a loss in their utility over multiple years.

Auditing 40

Auditing Accounting Accounting 40

Accounting Tools

JULY 24, 2023

An item is capitalized when it is recorded as an asset , rather than an expense. Alternatives to Capitalization When an asset has a useful life of just a few months, it may be more efficient to simply record it as a prepaid expense (a short-term asset), and then charge it to expense at a steady pace over its life.

Accounting 75

Accounting Accounting Computation Budgeting 75

Accounting Tools

MARCH 28, 2024

Obsolescence can arise when there are less expensive alternatives in the marketplace, or when customer preferences change. Obsolescence vs. Depreciation Obsolescence differs from the ongoing decline in the value of assets that is caused by normal usage, resulting in wear and tear.

Accounting 40

Accounting Accounting 40

Accounting Tools

NOVEMBER 1, 2023

Related Courses Fixed Asset Accounting How to Audit Fixed Assets What is the Annuity Method of Depreciation? The annuity method of depreciation is a depreciation technique that focuses on achieving a constant rate of return on an asset. The residual value is the depreciation to charge to expense in the current period.

Auditing 40

Auditing Accounting Accounting 40