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List of accounts that are generally under the Cost of Goods Accounts

Cost of Goods Sold
Purchases
Purchases Discounts
Purchases Returns and Allowance
Transporation In

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The double declining balance method is an accelerated method of depreciation. The first thing that you have to fiqure is the yearly percentage of depreciation. For example, the machine you just purchased has a useful life of 5 years. That amounts to 20% per year for depreciation on a regular basis, but we are doubling that each year under the double declining method. We depreciate until we reach the residual value by multiplying the carrying value by the double percentage. The chart below best illustrates the process

Popularity: 1% [?]

Calculating straight line depreciation is a fairly easy process. There are three things you need to know to fiqure it out.

Cost

Residual Value

Useful Life

The formula is:

For example, you buy a new car and it costs $12,000 and has residual value in 5 years of $2000.

(12,000 – 2000)/5 = 2000 per year for depreciation.

The accounting entry for this would be:

Depreciation Expense $2000 debit

Accumulated Depreciation $2000 credit

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The concept of present value is rather simple. If I want $1000 by the end of 2 years and then interest rate is 10%, how much do I need to invest today? The answer is $826.

Today this is a pretty simple calculation. Just push the buttons on your calculator and done. But, what if you had to fiqure it out the “old-fashioned” way. Well here’s the formula fiqure it out.

Present Value = Future Value/ (1 + Interest Rate)

For example, What would be the present value of $100 at 8% interest for 1 year?

Present Value = $100/(1 + .08)

Present Value = $100/1.08

Present Value = $92.59

Pretty simple, but what if you needed to fiqure it out for 3 years? Here’s how to do that.

Year 1 Present Value = $100/1.08 = $92.59

Year 2 $92.59/1.08 = $85.73

Year 3 $85.73/1.08 = $79.38

So in three years, if we invest $79.38 today, we will have $100

Of course there are a couple of shorter ways to calculate present value. Here is a formula that uses exponents.



Another quick short cut is to use the present value interest tables. This chart is usually labeled as the PVIF table. The tables already have the (1 + interest rate) fiqured out for you. For example, 5% interest for 8 years gives us a factor of .677.

Take $100 x .677 to get $67.70 as the answer. Can’t get any easier than that.

Popularity: 2% [?]

List of fixed assets. Fixed assets have a normal debit balance except Accumulated Depletion and Accumulated Depreciation and can be found on the balance sheet.

Accumulated Depletion
Accumulated Depreciation
Building
Equipment
Investment in Bonds
Investment in Stocks
Investment in Subsidary
Land

Popularity: 3% [?]

List of current liabilities that can be found on a Balance Sheet. They all have a normal credit balance.

Accounts Payable
Deferred Income Tax Payable
Employees Federal Income Tax Payable
Federal Income Tax Payable
Federal Unemployment Tax Payable
Income Tax Payable
Medicare Tax Payable
Salaries Payable
Sales Tax Payable
Social Security Tax Payable
State Unemployment Tax Payable
Unearned Rent
Vacation Pay Payable

Popularity: 5% [?]

This is a list of current assets that you normally use. They have a normal debit balance except the Allowance for Doubtful Accounts, which has a credit balance. These accounts are found on the balance sheet.

Accounts Receivable
Allowance for Doubtful Accounts
Cash
Finished Goods
Interest Receivable
Marketable Securities
Materials
Merchandise Inventory
Notes Receivable
Petty Cash
Prepaid Insurance
Supplies
Work in Progress

Popularity: 8% [?]