How To Account For Disposal Of Fixed Assets Whether It is Sold For Cash Or Traded in as Part Payment For Another Asset

Accounting Treatment For Disposal Of Fixed Asset When a fixed asset is disposed off: The accounting entry is to : Step 1: Debit : Asset Disposal Account Credit: Asset Account at Cost The purpose of this entry is to transfer the cost of the fixed asset to the asset disposal account Step 2: Debit: Provision for … Read more

Methods Of Accounting For Depreciation (Part 2 of 2)

In the first part, three(3) methods have been mentioned namely the Straight Line Depreciation, Reducing Balance Depreciation and the Sum of Digit method. In this final part, we shall discuss another three(3) methods for accounting for depreciation of fixed assets: REVALUATION METHOD   ·      Normally used for calculating depreciation of items such as loose tools … Read more

How To Record Depreciation In The Books Of Account

Basically, there are two (2) ways of recording depreciation: 1      Depreciation Charge is recorded in Depreciation Account And Fixed Asset Account is credited with the depreciation amount.   Accounting entries as follows: Step 1: Debit: Depreciation Account Credit: Fixed Asset Account Being initial taking up the depreciation into a Depreciation account.   Step 2: At … Read more

Methods Of Calculating Depreciation For Assets Bought Or Sold During An Accounting Period

Basically, there are three (3) methods of doing computing depreciation for assets bought or sold during an accounting period: 1.    Full year’s Depreciation Is Charged In The Year Of Purchase ignoring the date during the year that the assets were purchased. No depreciation is charged in the year that the assets were disposed irrespective of … Read more

Methods Of Accounting For Depreciation (Part 1 of 2)

Whichever method we used for depreciation accounting, we must always consider the following: The cost of asset, The probable/estimated life of the asset and The approximate residual or salvage value at the end of its life. Generally there are several methods of depreciation: Straight Line Method, Reducing Balance Method, Sum Of the Years Digits Method … Read more

Errors Affecting The Trial Balance And Suspense A/c (Part 2 of 2)

Part 1 illustrates the errors that do not affect the Trial Balance. In this article, we shall discuss the different type of errors which affect the agreement of the Trial Balance. To make the Trial Balance agree, a suspense account is used as a balancing figure. Earlier in my article on Suspense account, I have … Read more

Errors Not Affecting The Trial Balance (Part 1 of 2)

This article discussed the different type of errors which do not affect the agreement of the Trial Balance. When these type of errors are discovered, their correction is journalized in the General Journal to be posted to their respective ledgers. Errors Of Omission Occurs when a transaction is being COMPLETELY OMITTED from the books Example: … Read more

What Is The Difference Between Cost Allocation And Apportionment?

This article differentiate cost allocation and apportionments: Allocation Of Overheads or cost allocation Is to directly and specifically charge the overheads to the cost center. Two basic conditions exist before we can consider it as allocation: The cost center must have caused the overhead to be incurred and The exact amount of overhead must be … Read more

Listing Of Sources/Types Of Short-term Finance (Part 1 of 3)

Short- term finance is generally borrowings that repayable within ONE year. Medium- term finance are those repayable within 2 to 5 years and Long-term finance repayable after more than 5 years. Append below a list of: Sources or Types Of Short Term Finances 1.0 Bank Overdrafts 2.0 Bridging loans 3.0 Commercial Paper 4.0 Debt Factoring … Read more

The Benefits And Limitation Of Budgeting

In the earlier articles, we have discussed about the reasons/objectives and the key factors or processes required in budgeting.   This topic deals with the basic understanding of what benefits may accrue from budgeting and then what can be its limitations. Benefits Of Budgeting: Reinforce the management process of planning ahead. In fact, budget compel … Read more