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What is pay back period method of evaluating capital expenditure?
Wiki User
∙ 9y ago
Payback period method evaluates any investing activity from how much money it will pay back and how much time it requires to payback in number of years.
Wiki User
∙ 9y ago
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What is current expenditure?
Capital Expenditure:These are expenditure incurred in acquiring non-current assets or in making extension to existing non-current assets. Capital expenditure increases the earning capacity of a business. Businesses benefit from such type of expenditure over a long period of time. For example, a delivery vehicle can be used for over 5 years to deliver goods to customers. Computers may easily be used for 3 or 4 years. A building may be used for over 20 years.For the above reasons, capital expenditure are entered as non-current assets in the balance sheet. The cost of non-current assets is charged against profit over the years the assets can used and benefits derived. Such process is called "provision for depreciation".
It is an acceptable accounting practice to treat an expenditure that is not material in dollar amount as an expense of the current period even though the expenditure may benefit several periods?
True
Deferred revenue expenditure?
Deferred expenditure refers to expenses incurred which do not apply to the current accounting period. Instead, they are debited to a 'Deferred expenditure' account in the non-current assets area of your chart of accounts. When they become current, they can then be transferred to the profit and loss account as normal.
Difference between income and expenditure account and p and l account?
Differences Between Receipts And Payments Account And Income And Expenditure AccountThe following are the main differences between receipts and payments account and income and expenditure account: 1. NatureReceipts and payments account is a summary of cash transactions for a period and it is a real account. Income and expenditure account is a summary of expenditure and income like trading and profit and loss account and it is a nominal account.2. ObjectiveReceipts and payments account is prepared to show cash and bank receipts and payments during the period to derive closing balance of cash and bank. Income and expenditure account is prepared to show the net result of the operation during the period to derive surplus or deficit.3. RecordingAll cash and cheque receipts are recorded on debit side of receipts and payments account where as all cash and bank payments are recorded on credit side. In income and expenditure account all expenditure of revenue nature are recorded on debit side and all incomes of revenue nature are recorded on credit side.4. Capital And Revenue ItemsThere is no distinction between capital and revenue receipts and payments in receipts and payments account. All expenses and incomes of revenue nature are recorded on accrual basis in income and expenditure account.5. ContentsReceipts and payments account contains only cash and bank transactions. Income and expenditure account contains both cash and non-cash expenses and incomes of revenue nature.6. Balance Sheet RequirementReceipts and payments account is not required to prepare balance sheet. Income and expenditure account is required to prepare balance sheet.7. AdjustmentsNo adjustments are required in receipts and payments account. In income and expenditure account adjustments are made because it is prepared on accrual basis.
Payments of expenses that will benefit more than one accounting period are identified as?
deffered revenue expenditure
Why different sources of finance might be neededrevenue expenditure and capital expenditure?
this is beacuse revenue expenditure is for a short period of time therefore it wouldnt make sense for it to get a long term loan neither would it make sense it capital expenditure which is long term uses a short term method of finance
Why is a Capital Budget prepared separately from an Operating Budget?
There are two types of expenditure due to there time period of use. 1 - Capital Expenditure 2 - Revenue/Operating Expenditure As Capital Expenditure is utilize for more then one fiscal or accounting year that's why it's budgeting method is different and it is made for different items separately. Operating Budget is made for every year and evaluation is also made for yearly basis because operating expenditures are requires to allocate every year that's why both these budgets are made separately.
What is Pay back period method?
Method of evaluating investment opportunities and product development projects on the basis of the time taken to recoup the investment. This period is compared to the required payback period to determine the acceptability of the investment proposal. In contrast to return on investment and net present value methods, the cash inflows occurring after the payback period are not included in this method. Formula: Payback period (in years) = Initial capital investment ÷ Annual cash-flow from the investment.
What is the scopes of economics of education?
Economics of education helps in determining the relationship between educational expenditure and increase in the income or physical capital over a period of time in a country.
A method of evaluating capital investment proposals that ignore present value includes?
using payback period as the primary metric for decision making. The payback period measures the length of time it takes for the initial investment to be recovered from the project's cash flows. This method disregards the time value of money and does not account for the profitability or net present value of the investment.
What is payback period in financial accounting?
1. Payback period is an evaluating tool of any business capital expenditure that how much time it requires to fully recover the initial investment in any project for example: if a project require 100 investment and returns as follows: Year 1 60 year 2 20 year 3 20 year 4 10 so payback period to recover 100 is 3 years.
How are long term capital expenditures budgeted in a quarterly budgeting process?
Here is useful information from Answers.com: In terms of accounting, an expense is considered to be a capital expenditure when the asset is a newly purchased capital asset or an investment that improves the useful life of an existing capital asset. If an expense is a capital expenditure, it needs to be capitalized; this requires the company to spread the cost of the expenditure over the useful life of the asset. If, however, the expense is one that maintains the asset at its current condition, the cost is deducted fully in the year of the expense. In your case, budget the allocated cost disbursement over a three-month period (for a quarterly budget).
Meaning of capital expenditures?
Capital expenditure means an amount spent to acquire or upgrade productive assets (such as buildings, machinery and equipment, vehicles) in order to increase the capacity or efficiency of a company for more than one accounting period. Also called capital spending.
What is the scope of economics in education?
economics of education helps in determining the relationship between educational expenditure and increase in the income or physical capital over a period of time in a country.
What is different between capital and revenue expenditure?
Revenue expenditures are those expenditures which are incurred more than once in a fiscal year and benefits are for only one fiscal year while capital expenditures are those expenditure the benefits of which are taken by company for more than one fiscal years.
Write with reasons whether the following payments are capital or revenue apurchased computer for rs 120000 bpurchased ststionery for rs 12000 cpurchaesd a godrej table for rs 40000 e0 paid salaries to?
a) The purchase of a computer for Rs 120,000 is a capital expenditure because it is a long-term asset that will provide benefits to the business beyond the current accounting period. b) The purchase of stationery for Rs 12,000 is a revenue expenditure as it is a routine operational expense needed for day-to-day activities and does not provide long-term benefits. c) The purchase of a Godrej table for Rs 40,000 is a capital expenditure as it is a tangible asset that will be used over multiple accounting periods and provide long-term value to the business. d) Salaries paid to employees are considered a revenue expenditure as they are a necessary cost to operate the business and are incurred regularly for the services provided by employees.
What is current expenditure?
Capital Expenditure:These are expenditure incurred in acquiring non-current assets or in making extension to existing non-current assets. Capital expenditure increases the earning capacity of a business. Businesses benefit from such type of expenditure over a long period of time. For example, a delivery vehicle can be used for over 5 years to deliver goods to customers. Computers may easily be used for 3 or 4 years. A building may be used for over 20 years.For the above reasons, capital expenditure are entered as non-current assets in the balance sheet. The cost of non-current assets is charged against profit over the years the assets can used and benefits derived. Such process is called "provision for depreciation".
