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Treasury and Fund Management
Treasury and Fund Management
Treasury and Fund Management
An example of fixed assets are buildings, furniture, office equipment, machinery etc.. A land is the only
exception which cannot be depreciated as the value of land appreciates with time.
Depreciation allows a portion of the cost of a fixed asset to the revenue generated by the fixed asset.
This is mandatory under the matching principle as revenues are recorded with their associated expenses
in the accounting period when the asset is in use. This helps in getting a complete picture of the revenue
generation transaction.
An example of Depreciation – If a delivery truck is purchased a company with a cost of Rs. 100,000 and
the expected usage of the truck are 5 years, the business might depreciate the asset under depreciation
expense as Rs. 20,000 every year for a period of 5 years.
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Straight-line depreciation is a very common, and the simplest, method of
calculating depreciation expense. In straight-line depreciation, the expense
amount is the same every year over the useful life of the asset.
Depreciation Formula for the Straight Line Method:
Depreciation Expense = (Cost – Salvage value) / Useful life
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4. Sum-of-the-Years-Digits Depreciation Method
The sum-of-the-years-digits method is one of the accelerated depreciation
methods. A higher expense is incurred in the early years and a lower
expense in the latter years of the asset’s useful life.
In the sum-of-the-years digits depreciation method, the remaining life of an
asset is divided by the sum of the years and then multiplied by the
depreciating base to determine the depreciation expense.
The depreciation formula for the sum-of-the-years-digits method:
Depreciation Expense = (Remaining life / Sum of the years digits) x (Cost –
Salvage value)
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