Is the net book value of fixed assets in the balance sheet represens or equal to its current “market value”?

Some would presume that the value of a fixed asset in the balance sheet namely: (a)    Cost less accumulated depreciation; or at (b)   Revalued amount less accumulated depreciation Is equal to or represent its current “market value” The answer  is that generally the net book value of a fixed asset is NOT necessarily remotely similar … Read more

Is it true that as depreciation reduces profits and does not take cash out of business, it is a way of keeping cash inside the business to provide for the eventual replacement of the asset at the end of its life?

It is wrong to think that way due to: (a)    By charging depreciation on fixed assets, it does not mean that a business will set aside the same amount of cash in a bank account to provide for the replacement of the asset. It is important to understand that depreciation is NOT a way of … Read more

Accounting Quiz or Test Your Accounting Knowledge On Partnership Accounts

Refresh or test your accounting knowledge on Partnership Accounts : QUESTIONS:1.0  What is “ joint an several liability? 2.0  Describe two ways in which the accounts of a partnership differ from those of a sole trader 3.0  What are the differences between a partner’s current account ad his capital account? 4.0  Interest paid on loans made … Read more

What do we mean by balancing ledger accounts?

BALANCING LEDGER ACCOUNTS:Balancing ledger accounts is normally done at the end of an accounting period where it is a routine process to have a balance  struck on each account in turn. This means that all the debits on the account are totaled and so are all the credits. If the total debits exceed the total … Read more

Explain what is Impersonal and Personal accounts?

IMPERSONAL ACCOUNT:In the accounts of the nominal ledger, we have different types of expenses for different purposes like rent, insurance, telephone and others. As these expenses are related NOT to the person to whom the money is paid and more concerned towards the reason for payment these are known as IMPERSONAL accounts. PERSONAL ACCOUNT: In … Read more

Explain what is nominal ledger?

Nominal Ledger: The nominal ledger is an accounting record which summarizes the financial affairs of a business. It contains details of assets, liabilities and capital, income and expenditure and so profit and loss. It consists of a large number of different accounts, each account having its own purpose or “name” and an identity or code. … Read more

Explain what are Depreciable Assets

Depreciable assets are assets which: are expected to be used during more than one accounting period have a limited useful life and are held by an enterprise for use in the production or supply of goods & service, for rental to others or for administrative purposes. Therefore these assets are normally non-current assets like fixed … Read more