Accounting Flashcards
Parameters to calculate depreciation
- Useful life of non current asset
- Residual value: how much the assets worths at the end of the period. It can be =0
- Depreciation method:
A. Linear: depreciate the same amount each year
B. Accelerated
Depreciation formula
(Original cost - residual value) / Useful life
What is the difference between amortization and depreciation
Depreciation = tangible non current assets Amortization = intangible non current assets (f.e software)
Return on sales
Net Profit / Sales
Return on Equity (ROE)
Net Profit / Owners Equity
Gain/Loss of selling assets =
Selling price - Net Book value
Net book value = Original cost- accumulated depreciation
Dividends are credited from….
Retained profits account, not the P&L
This way even if a company losses money one year it can still pay dividends from retained profits
Where do you account for the net profit/loss from operations in the balance sheet
You account using the P&L account. The ending balance is reclassified as Retained profits in the balance sheet
Transactions with non current assets are included in cashflow from ________
Cashflow from investing
Interests payments are included in the cashflow from_____
Cashflow from operations
Dividends payments are included in the cashflow from_____
Cashflow from investing
In hotel California, the owners asked for $25 deposit with each reservation. By 31 December x7 they had collected deposits totaling $2350 for reservations in x8. This advance payments had been deposit in the bank and were included in the $80.020 collected from customers
What are the journal entries for this operations?
Dr Cash (A+) 80.020
Create a new account, Customer Deposits under current liabilities
Cr. Customer Deposits (L+) 2.350
Cr Operating revenues (OE+) 77.670
Don´t include the reservation in the revenues because these are payments for x8 (next year)
