Non-current assets are long-term investments that are not easily converted into cash within an accounting year. They are required for the long term in the business. They have a useful life of more than an accounting year. Non-current assets can be fixed assets and intangible assets. Fixed assets areRead more
Non-current assets are long-term investments that are not easily converted into cash within an accounting year. They are required for the long term in the business. They have a useful life of more than an accounting year.
Non-current assets can be fixed assets and intangible assets. Fixed assets are tangible assets that can be seen and touched. Whereas, intangible assets are those assets that can not be seen and touched.
You can correlate examples of Non-Current Assets with tangible and intangible assets as mentioned below:
Land and building – They are fixed assets that will give long-term benefits and will be classified as noncurrent assets.
Plant and Machinery – They are tangible assets will give future benefits and are thus mentioned under noncurrent assets.
Office Equipment – They are tangible assets that will give future economic benefits to the company, and comes under noncurrent assets.
Vehicles – They are tangible assets that will give long-term benefits, and will be classified as noncurrent assets.
Furniture – They are also tangible assets that will give future benefits and are classified as non-current assets.
Trademarks – These are intangible assets that will not be easily converted into cash and will be classified as noncurrent assets.
Goodwill – They are intangible assets that can’t be easily converted into cash, and are classified as non-current assets.
Patents – They are intangible assets that will not be converted into cash within an accounting period, and are classified as non-current assets.
Copyrights – They are intangible assets that will not be converted into cash within an accounting period, and are classified as non-current assets.
Long-term Investments – They are long-term investments that will not be easily converted into cash within an accounting period and are classified as non-current assets.
Non-current Assets = Total Liabilities – Current Assets
Current Assets are the assets that will be converted into cash within an accounting year. They include cash, bank, debtors, etc.
Straight Line Depreciation Journal Entry Straight-line depreciation refers to the diminishing value of assets over the life of the asset. In other words, the cost of the asset spreads evenly over the useful life of the assets. The salvage value or Residual value of an asset means the estimated valueRead more
Straight Line Depreciation Journal Entry
Straight-line depreciation refers to the diminishing value of assets over the life of the asset. In other words, the cost of the asset spreads evenly over the useful life of the assets.
The salvage value or Residual value of an asset means the estimated value of the asset at the end of its useful life.
The depreciation can also be charged with another method like Written Down Value (WDV) Method.
Formula
Depreciation per annum = ( Cost of asset – Salvage Value) / Useful Life
The journal entry for the depreciation is:
JOURNAL ENTRIES
Depreciation on Asset A/C DR.
To Asset A/C
(Being depreciation charged on asset)
Now let us understand this with an example, suppose XYZ Ltd. has an asset of value 90,000 with a useful life of 3 years. The company uses the straight-line method of depreciation to depreciate the asset in its book.
So, the depreciation per annum would be calculated as:-
= 90,000/3
= 30,000
In Year 1, the depreciation will be charged as 30,000 for this year. It will be debited to the depreciation account and credited to the asset account. Thus, the value of the asset at the end of year 1 will be 60,000 (90,000-30,000).
JOURNAL ENTRIES
DR
CR
Depreciation on Asset A/C 30,000
To Asset A/C 30,000
(being depreciation charged on asset)
In Year 2, the depreciation will be charged as 30,000. The entry would be the same as the previous year. The value of the asset at the end of year 2 will be 30,000 (60,000-30,000).
JOURNAL ENTRIES
DR
CR
Depreciation on Asset A/C 30,000
To Asset A/C 30,000
(being depreciation charged on asset)
At last in Year 3, the depreciation will be charged 30,000. The entry would be the same. The value of the asset at the end of year 3 will be Nil (30,000- 30,000).
JOURNAL ENTRIES
DR
CR
Depreciation on Asset A/C 30,000
To Asset A/C 30,000
(being depreciation charged on asset)
The depreciation will be charged to the profit and loss account for the year as it is an expense for the company.
The entries will be posted into depreciation account as mentioned:
Types of Partnership A partnership is an agreement between two or more people who comes together to run a business. There are different types of partnerships formed with different perspectives as mentioned: General Partnership Limited Partnership Limited Liability Partnership Partnership at will ParRead more
Types of Partnership
A partnership is an agreement between two or more people who comes together to run a business.
There are different types of partnerships formed with different perspectives as mentioned:
General Partnership
Limited Partnership
Limited Liability Partnership
Partnership at will
Partnership for a fixed term
General Partnership
It refers to the partnership where all partners actively manage the business and have unlimited legal liability. Generally, all the partners share equal profit and loss in the business and are also equally liable for the outsider’s loan.
All the partners are responsible for the business’s day-to-day operations and managerial responsibility.
If the partners decided to share profit and loss in any other ratio (unequal ratio), then they have to disclose this in a agreement called a partnership deed.
In this, debts are equally borne by selling the partners assets of all the partners. In case of dissolution, if the partnership firm has taken a loan from outsiders and does not have sufficient funds to repay the amount then the payment can be done by selling the partner’s personal property.
It can be formed by signing the partnership agreement that would be proved as evident in case of disagreement among partners. For instance, if any partner dies or leaves the firm then they should follow the content of the agreement.
A general partnership does not pay the tax instead the partners personally report their income tax return.
Limited Partnership
In a Limited partnership, all the partners contribute capital but not necessarily all of them manage the business.
The old partners add a new partner into the partnership to fulfill the financial needs of the business i.e. for capital. The rights of decision-making are issued to new partners on the basis of their contribution of capital. The new partner is not associated with day-to-day business activities. He /She is called a limited partner or silent partner.
The liability partner has limited liability to the extent of his capital. The personal assets of the limited partner can not be used for the payment of the firm’s liability.
Limited Liability Partnership
It is a more popular type of partnership in today’s world. To form an LLP you have to register under the Limited Liability Partnership Act, 2008.
In this, all the partners have limited liability to the extent of the capital investment in the business. The personal assets of the partners can not be used to discharge the liability of the partnership.
A Minimum of 2 partners are required to form an LLP. However, no maximum limit on a number of partners.
It has also some features of the company. It has a separate legal entity. The LLP can buy property in its own name and sue and be sued in its name.
LLPs are often formed by professionals like Chartered Accountants, doctors and Legal firms.
Features
It has a separate legal entity.
The cost of forming is low.
It requires less compliance and regulations.
Minimum two partners are required, no limit on the maximum number of partners.
The partners has limited liability.
Partnership at will
Partnership at will is a form of business where there is no fixed tenure of the partnership. That means there is no expiration of the partnership. But if the partnership is formed for a fixed duration and its period has expired and still continues then it will become a partnership at will.
Partnership for a fixed term
The partnership is created for a fixed duration of the interval. After the expiration of such duration, the partnership may come to an end.
If the partners share profit and loss even after the expiration of the duration of the partnership then it will become a partnership at will.
What are some examples of non-current assets?
Non-current assets are long-term investments that are not easily converted into cash within an accounting year. They are required for the long term in the business. They have a useful life of more than an accounting year. Non-current assets can be fixed assets and intangible assets. Fixed assets areRead more
Non-current assets are long-term investments that are not easily converted into cash within an accounting year. They are required for the long term in the business. They have a useful life of more than an accounting year.
Non-current assets can be fixed assets and intangible assets. Fixed assets are tangible assets that can be seen and touched. Whereas, intangible assets are those assets that can not be seen and touched.
You can correlate examples of Non-Current Assets with tangible and intangible assets as mentioned below:
Land and building – They are fixed assets that will give long-term benefits and will be classified as noncurrent assets.
Plant and Machinery – They are tangible assets will give future benefits and are thus mentioned under noncurrent assets.
Office Equipment – They are tangible assets that will give future economic benefits to the company, and comes under noncurrent assets.
Vehicles – They are tangible assets that will give long-term benefits, and will be classified as noncurrent assets.
Furniture – They are also tangible assets that will give future benefits and are classified as non-current assets.
Trademarks – These are intangible assets that will not be easily converted into cash and will be classified as noncurrent assets.
Goodwill – They are intangible assets that can’t be easily converted into cash, and are classified as non-current assets.
Patents – They are intangible assets that will not be converted into cash within an accounting period, and are classified as non-current assets.
Copyrights – They are intangible assets that will not be converted into cash within an accounting period, and are classified as non-current assets.
Long-term Investments – They are long-term investments that will not be easily converted into cash within an accounting period and are classified as non-current assets.
Non-current Assets = Total Liabilities – Current Assets
Current Assets are the assets that will be converted into cash within an accounting year. They include cash, bank, debtors, etc.
BALANCE SHEET
See lessWhat is straight line depreciation journal entry?
Straight Line Depreciation Journal Entry Straight-line depreciation refers to the diminishing value of assets over the life of the asset. In other words, the cost of the asset spreads evenly over the useful life of the assets. The salvage value or Residual value of an asset means the estimated valueRead more
Straight Line Depreciation Journal Entry
Straight-line depreciation refers to the diminishing value of assets over the life of the asset. In other words, the cost of the asset spreads evenly over the useful life of the assets.
The salvage value or Residual value of an asset means the estimated value of the asset at the end of its useful life.
The depreciation can also be charged with another method like Written Down Value (WDV) Method.
Formula
Depreciation per annum = ( Cost of asset – Salvage Value) / Useful Life
The journal entry for the depreciation is:
JOURNAL ENTRIES
Now let us understand this with an example, suppose XYZ Ltd. has an asset of value 90,000 with a useful life of 3 years. The company uses the straight-line method of depreciation to depreciate the asset in its book.
So, the depreciation per annum would be calculated as:-
= 90,000/3
= 30,000
In Year 1, the depreciation will be charged as 30,000 for this year. It will be debited to the depreciation account and credited to the asset account. Thus, the value of the asset at the end of year 1 will be 60,000 (90,000-30,000).
JOURNAL ENTRIES
In Year 2, the depreciation will be charged as 30,000. The entry would be the same as the previous year. The value of the asset at the end of year 2 will be 30,000 (60,000-30,000).
At last in Year 3, the depreciation will be charged 30,000. The entry would be the same. The value of the asset at the end of year 3 will be Nil (30,000- 30,000).
JOURNAL ENTRIES
CR
The depreciation will be charged to the profit and loss account for the year as it is an expense for the company.
The entries will be posted into depreciation account as mentioned:
See lessWhat are the types of partnership?
Types of Partnership A partnership is an agreement between two or more people who comes together to run a business. There are different types of partnerships formed with different perspectives as mentioned: General Partnership Limited Partnership Limited Liability Partnership Partnership at will ParRead more
Types of Partnership
A partnership is an agreement between two or more people who comes together to run a business.
There are different types of partnerships formed with different perspectives as mentioned:
General Partnership
Limited Partnership
Limited Liability Partnership
Partnership at will
Partnership for a fixed term
General Partnership
It refers to the partnership where all partners actively manage the business and have unlimited legal liability. Generally, all the partners share equal profit and loss in the business and are also equally liable for the outsider’s loan.
All the partners are responsible for the business’s day-to-day operations and managerial responsibility.
If the partners decided to share profit and loss in any other ratio (unequal ratio), then they have to disclose this in a agreement called a partnership deed.
In this, debts are equally borne by selling the partners assets of all the partners. In case of dissolution, if the partnership firm has taken a loan from outsiders and does not have sufficient funds to repay the amount then the payment can be done by selling the partner’s personal property.
It can be formed by signing the partnership agreement that would be proved as evident in case of disagreement among partners. For instance, if any partner dies or leaves the firm then they should follow the content of the agreement.
A general partnership does not pay the tax instead the partners personally report their income tax return.
Limited Partnership
In a Limited partnership, all the partners contribute capital but not necessarily all of them manage the business.
The old partners add a new partner into the partnership to fulfill the financial needs of the business i.e. for capital. The rights of decision-making are issued to new partners on the basis of their contribution of capital. The new partner is not associated with day-to-day business activities. He /She is called a limited partner or silent partner.
The liability partner has limited liability to the extent of his capital. The personal assets of the limited partner can not be used for the payment of the firm’s liability.
Limited Liability Partnership
It is a more popular type of partnership in today’s world. To form an LLP you have to register under the Limited Liability Partnership Act, 2008.
In this, all the partners have limited liability to the extent of the capital investment in the business. The personal assets of the partners can not be used to discharge the liability of the partnership.
A Minimum of 2 partners are required to form an LLP. However, no maximum limit on a number of partners.
It has also some features of the company. It has a separate legal entity. The LLP can buy property in its own name and sue and be sued in its name.
LLPs are often formed by professionals like Chartered Accountants, doctors and Legal firms.
Features
Partnership at will
Partnership at will is a form of business where there is no fixed tenure of the partnership. That means there is no expiration of the partnership. But if the partnership is formed for a fixed duration and its period has expired and still continues then it will become a partnership at will.
Partnership for a fixed term
The partnership is created for a fixed duration of the interval. After the expiration of such duration, the partnership may come to an end.
If the partners share profit and loss even after the expiration of the duration of the partnership then it will become a partnership at will.
See less