Original Cost of Asset This is the cost of the asset. It is also known as historical cost. It includes : Example – Below cost details are with regard to purchase of a machinery : Note : Any refundable taxes are not included in the cost Estimated Residual Value or Scrap value Amount estimated to […]
Factors in Depreciation calculation Read More »
Show true and fair view of financial statements Financial Statements are made on historical cost basis. It means that the transactions are recorded in books of accounts at purchase price. In case of assets however the value of assets is reduced due to usage or passage of time continuously. So it is right to reduce
Objectives for providing depreciation Read More »
Depreciation is the reduction in the value of an asset due to : Depreciation can be used both in the practical sense and in accounting sense. In practical sense the reduction happens in the market value of an asset you own like mobile phone, laptop, car, furniture, washing machine, TV, etc. whose value reduces as
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The retiring partner is entitled to his share in firms Goodwill as he has also put in efforts in the formation of firm’s Goodwill. The retiring partner is paid back his share in the assets of the firm. Goodwill is also an asset for the firm. So retiring partner is paid his share from Goodwill
Goodwill Accounting on retirement of a partner Read More »
Description Gaining Ratio Sacrificing Ratio Formula for calculation New profit Sharing Ratio Less Old Profit Sharing ratio Old profit sharing Ratio Less New profit Sharing Ratio When calculated a) Retirement of a Partner b) Change in profit sharing ratio among existing partners a) Admission of a partner b) Change in profit sharing ratio among existing
Gaining Ratio and Sacrificing Ratio – Difference Read More »
Retirement of a partner is another form of reconstitution of the firm.. In this case, also, the old partnership agreement comes to an end and a new partnership agreement comes into effect.. A partner may retire from the firm due to any of the following reasons: Adjustments required on the retirement of a partner Liabilities
Retirement of a Partner – Meaning and Effects Read More »
Five types of adjustments are required on the admission of a new partner in a partnership firm The above five types of adjustments are common for every type of reconstitution of partnership firm which includes: Thus the above said 5 types of adjustments will be done in each case of reconstitution of partnership firm
Admission of a Partner – Adjustments Required Read More »
Case 1 Once upon a time, there was a small business owner named John who ran a successful furniture store. He had always been careful about managing his finances, and he had a good balance of debt and equity to support his business. However, one day, John received an offer to open a second location
Why having high debt is not good for business Read More »
Once upon a time, there was a young entrepreneur named Kiara who had just started her own business. She was determined to make her business a success, but she also knew that she would need to be smart about managing her finances. One day, Kiara heard about the concept of debt equity ratio. She learned
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