the asset method = record all purchases as asset then recognize expense (diff of beg bal & end bal) dr. prepaid supply (purchase) cr. cash expense method = record all purchases as expense, then account for the ending balance. adjust beg balance to reflect end balance. dr. supply expense cr. cash
Depreciation does not effect cash flow statement as depreciation is not a cash expense rather it is just a treatement to dispose off the value of asset according to useful life of asset and the cost of asset is already shown in cash flow statement when asset is purchased.
Debit: Profit & Loss Account Credit: Cash In Hand or Petty Cash Nature of Debit is Expense and the nature of Credit is Asset. Expense Increased and Asset Decreased If you have an account already open for such Losses then you should debit such account. For example in my company Cash loss is usual Case so we have an Account titled "Cash Lost Expense" In my cash I will pass the entry as Debit: Cash Lost Expense Credit: Cash in Hand or Petty Cash
cash expense revenue asset liabilites
Insurance is an expense, it should never be considered an asset. That is why cash-value policies are not recommended. Stick with simple term insurance and you will save money.
the asset method = record all purchases as asset then recognize expense (diff of beg bal & end bal) dr. prepaid supply (purchase) cr. cash expense method = record all purchases as expense, then account for the ending balance. adjust beg balance to reflect end balance. dr. supply expense cr. cash
Depreciation does not effect cash flow statement as depreciation is not a cash expense rather it is just a treatement to dispose off the value of asset according to useful life of asset and the cost of asset is already shown in cash flow statement when asset is purchased.
Debit: Profit & Loss Account Credit: Cash In Hand or Petty Cash Nature of Debit is Expense and the nature of Credit is Asset. Expense Increased and Asset Decreased If you have an account already open for such Losses then you should debit such account. For example in my company Cash loss is usual Case so we have an Account titled "Cash Lost Expense" In my cash I will pass the entry as Debit: Cash Lost Expense Credit: Cash in Hand or Petty Cash
cash expense revenue asset liabilites
Insurance is an expense, it should never be considered an asset. That is why cash-value policies are not recommended. Stick with simple term insurance and you will save money.
Correct. When a long-term tangible asset is purchased (e.g., property, plants and equipment), the Matching Principle under GAAP requires expenses to be systematically matched with the periods in which the corresponding revenues are generated. All depreciation expense does is systematically expense the asset over the period of its useful life. The useful life of the asset has nothing to do with when cash was actually paid for the asset.
Depreciation is a non-cash expense that matches the income generated by an asset or its useful life. When creating a statement of cash flows depreciation expense is the first item added back in.
Depreciation Expense, though called an expense, is not an expense where the company actually pays money out. The statement of cash flows deals with the company's "cash flow" in order for a manager to see where the company's cash is going to and coming from. Since depreciation expense doesn't involve actual cash flow, it would not affect the Cash account.
Depreciation expense is neither an asset or liability. It is an expense.
preliminary expense is the expense for fitting the asset or similar works, so this expenses capitalized.... and is called fixed asset
Operating Expenses are the cost of doing business and are paid out of the company's cash or in some cases paid with Bonds, Stocks, or Dividends, either way, these expense will affect the Cash of the company and it's worth. Their are two accounts for Depreciation one is Accumulated Depreciation. This is an Contra-Asset Account and is listed on the Balance Sheet under assets and is deducted from the related asset account. Depreciation Expense is the expense we claim from Accumulated Depreciation and though it is an expense it does not affect our Cash. We do not actually "pay" this expense. Depreciation is the decline in usefulness of a Fixed Asset. Remember, all Fixed Assets (except Land) lose their usefulness. Decreases in the usefulness of assets that are used in generating revenue are recorded as expenses. However, such decreases for fixed assets are difficult to measure. For this reason, a portion of the cost of the fixed asset is recorded as an expense each year for its useful life.
Answer:Even though cash has been spent on purchasing the fixed asset, accounting principles will prescribe that an asset needs to be recognized. This is an application of the matching principle, which states that cash expenditures need to be allocated as an expense in the period where they generate revenue. Suppose the fixed asset is a machine, which will be used to produce goods, which will be sold at a profit. The sales will be recorded as the products are sold during the economic lifetime. Hence, the purchase price of the fixed asset needs to be allocated (spread) over the economic lifetime as well. The expense is called depreciation expense.