Depreciation of Fixed Assets

A fixed asset has a limited life. The allocation of its cost cover its useful life is termed either depreciation or depletion or amortization. These are explained as under:

Amortization:
The cost of fixed intangible assets, which has been used, is called amortization.

Depletion:
The exhaustion (physical shrinkage, lessening or waste) of a natural recources is called "Depletion". It is charged on the wasting fixed assets such as oil and mineral deposits etc.

Depreciation:
The cost of permanent fixed tangible asset, which has been used, is called "depreciation". It is charged on the permanent fixed assets such as machinery and equipment except land.

Depreciation expense must be recorded because it is one of the costs which are incurred in the production of periodic income. If depreciation was not recognized upon the books, the net income of the business would be overstated and depreciable asset would appear in the balance sheet at value greater than their real values.

Assets cost includes all expenses relating to the acquisition of asset and including it in the factory. The salvage value of a depreciable asset is that amount which can be expected to be realized upon retirement of an asset. The life of an asset may be expressed in terms of either an estimated time factor or estimated use factor. The time factor may be a period of month or years. The use factor may be a number of hours of service or number of units of output.

Chart of Accounts

Chart of Accounts is grouped into five main categories:
1. Assets
2. Liabilities
3. Capital
4. Expenses
5. Revenues

Assets:
Assets are the recources of business, which a business utilizes to get future economic benefits. Assets are sub-grouped into two categories:
1. Current Assets
2. Fixed Assets

Current Assets:
Current Assets are recources, which a business usually utilizes with a year. Some of the current assets are: Cash in hand, Cash at bank, Bills Receivable, Notes Receivable, Inventory etc.

Fixed Assets:
Fixed Assets are recources of business, having a life more than one year. The assets purchased for resale are not included in Fixed Assets. Some of the fixed assets are: Land, Building, Machinery, Furniture etc.

Liabilities:
Liabilities are the Debts. Some of the examples of Liabilities are:
* Accounts payable- the parties from which goods are purchased on credit.
* Loan from Bank- usually provided by Commercial Banks.

Capital:
Capital is the amount which owner provides for operating business activities. Capital is increased when recources of business are increased when Owner additionally invests cash or other asset and the business earn profit.

Expenses:
Cost intended to benefit the near future like, Salaries, Rent, Bank charges etc.

Revenues:
The term Revenue stands for sale of product, service and merchandise or earnings from interest, dividends, rent etc, or gains from sale or exchange of assets. Some of the revenues are sales, rent income, commission income etc.

What is Debit Card?

Debit cards work like plastic cheques. When its owner makes a purchase with it, the payment for the purchase is taken directly from his bank account. If the owner's account has insufficient funds to cover the expense, his card payment will be declined.

Debit cards come in two varieties, online and offline. Online cards function like ATM cards, requiring its owner to enter a personal identification number (PIN) to initiate the immediate transfer of funds from his bank account to the merchant's bank account. In some countries, such as Canada, online debit cards are the only variety of debit cards that are accepted.