Accounting Sub Journals and Cash Book
January 28, 2012 | 
Author The accounting procedure, for recording information, involves two steps, namely journalizing and posting. It follows that every business must maintain a journal (books of original or prime entry) and a ledger (principal book). Thus the system of book-keeping originally envisages that all the transactions must be recorded first in the book of original record, i.e., journal and then each transaction so recorded in the journal should be posted in the principal book, i.e., ledger. Subsequently it was experienced that the labor of recording each transaction with narration in the journal and then posting each entry in two different accounts in the ledger was enormous. The procedure was more time-consuming and resulted in higher establishment cost.
It is but natural that in every business most of the transactions relate to receipts and payments of cash; purchases of goods ;. sales of goods etc. It was found to be convenient and economical to keep separate books to record each particular class of transactions. Each separate book meant to record transactions of a particular class is the book of original or prime entry. It is also known as sub-journal or subsidiary book. The system under which transactions of similar nature are entered in the relevant’ subsidiary book and on the basis of which ledger is written is known as the ‘practical system of book- keeping’. This system reduces labor and time of recording the transactions as impersonal accounts, viz., sales account, purchases account etc., receive the posting of totals and not of individual transactions. However, this system also conforms to the basic rules of the double entry system.
Generally the following subsidiary books are used in the business:
(1) Cash book : records receipts and payments of cash including transactions relating to bank;
(2) Purchases book: records credit purchases of goods meant for sale or for conversion into finished goods;
(3) Returns outwards book: records return of the goods to the suppliers due to several reasons;
(4) Sales book: records credit sales of the goods dealt in by the business;
(5) Returns inwards book : records the return of goods by the customers to the business ; (vi) Bills receivable book: records the receipts of bills of exchange, promissory notes and hundies of various parties;
(6) Bills payable book: records the issue of bills exchange, promissory notes and hundies to the various parties:
Advantages of sub-journals
(1) It results in saving of time by (a) enabling the recording procedure to be carried on simultaneously in different subsidiary books and (b) by posting the periodical totals in the impersonal accounts.
(2) It makes information available regarding each particular class of transactions.
(3) At the time of preparing trial balance the checking is easier because books being many, different persons can carry out the job.
Cash Book
In any business, perhaps, the largest number of transactions of one nature must relate to cash and bank. It is so because every transaction must, ultimately, result in a cash transaction. Now if every cash transaction is to be recorded in journal, it will involve an enormous amount of labor in debiting or crediting cash or bank account in the ledger for each transaction. Therefore, it is convenient to have a separate book, the cash book, to record such transactions. Maintaining of cash book removes the necessity of having cash and bank accounts in the ledger. This book enables us to know the balance of cash in hand and at bank at any point of time.
Cash book consists of cash and bank accounts taken out of ledger and maintained separately; thus it is a substitute of ledger for cash and bank accounts. It is also a book of original entry because cash and bank transactions are not recorded in any other subsidiary book.
Types of cash books
The type of cash book to be used by any business will depend upon its nature and requirements. It may be anyone of the following:
(1) Single column cash book (cash column).
(2) Double column cash book (cash and discount columns).
(3) Triple column cash book (cash, discount and bank columns).
(4) Bank cash book (bank and discount columns).
Generally, each business will use anyone of the above types of cash book along with “petty cashbook” which is maintained on memorandum basis.
Distinction between cash A/c and Cash book
Actually cash book is a perfect substitute of cash account. In both, cash transactions are recorded date wise in order of occurrence. Cash balance as on any date can be ascertained by balancing both on any day desired. Yet there are some differences between the two as given below:
Cash account
1. Is an account in the ledger.
2. Cash account is part of the ledger. Cash account is opened in the ledger in which posting is done from some book of original entry i.e. journal
3. In cash account posting is not followed by narration.
4. It only records one aspect of transaction involving cash and bank.
Cash book
1. Is a separate book of accounts forming part of accounting system.
2. Cash book records entries directly from transactions and these is no need for a book of prime entry.
3. In cash book entries are followed by narration also.
4. It records both the aspects of this transaction in cash and bank columns to complete double entry posting.
I Am Broke, What Should I Do?
When it comes to having money you will find that most of the people who you socialise with will tell you that they haven’t got any money, they will tell you in your face, I am broke. When I come across an individual like that I cannot but help to think how sad they are. This is because when someone claims that they are broke, usually they are, they are just too stingy to show you any money in case you might want some of their cash. But the thing that most annoys me is the saying, I am broke. This is because usually when someone says that, it means that they are too lazy to get a job or do anything about their self chosen unfortunate situation.
So after seeing these people I decided to do something for them, for example give them ideas on how to raise finance. So if you are one of those individuals, please stop looking for the pay check to drop from the sky, and take a look at opportunities in the home based business industry. I suggest that you look online because I assume these individuals are lazy enough to even think about making a trip to the job centres. The home based industry can be your escape to having some money, for some even the ticket to live the extraordinary life that is only seen in dreams. Learn how to earn cash from the comfort of your own home, there are many ways you can earn online these days. Perhaps the biggest one of all for you to start earning, BIG TIME. So please stop saying I am broke, because I know 13-year-olds who do not know the meaning of that word, who are earning over $1000 a month online.
7 Tips to Real Estate Agents’ Success
With over 2 million real estate agents according to the National Association of Realtors (NAR), becoming a successful real estate agent takes more than just a license and a knowledge of current laws and regulations.The first year drop out range estimated to be from 40% to 80% demonstrates that many real estate agents are not as successful as they could be and research suggests that 90% give up after 3 years. The following 7 tips may help you avoid becoming one of these statistics.
First and Foremost YOU are a business. Real estate agents work for a broker, but are independent, commissioned sales people. This means that you are a small business and must run your practice as a business. Again, remember you are a small business owner.
Embrace a Planning Attitude. If you don’t have a plan, then you are on some else’s plan – usually the successful real estate agent’s. During the last 10 years, what I have learned as a performance improvement consultant or coach is that most people place more value in planning a trip to the grocery store or a vacation than planning their lives either professionally or personally.
Research Your Market Plan. Since you, as the real estate agent, are responsible for your own expenses, do your research specific to your marketing plan within your strategic plan. Time spent in constructing your marketing plan is definitely well spent. NOTE: Remember a business plan usually is data driven, while a strategic plan identifies who does what by when.
Establish Sales Goals. Using your strategic action plan, establish sales goals. If you are new to this industry, it may take 6 months before the first sale. HINT: Use the W.H.Y. S.M.A.R.T. criteria for goal setting.
Create a Financial Budget. Budgeting is critical given the up and down of this volatile market place. Your financial budget should plan for your marketing costs, any additional costs such as education and your forecasted income.
Make Managing Yourself a Priority. Building a business is not easy. You must learn how to manage yourself especially in the area of time management, ongoing real estate business training coaching continuing education units, and personal life balance. Real estate is said to be a 24/7 business much like any small business. However, it is important not to lose sight of your personal life including family, friends, physical health, etc.
Find a Mentor or a Real Estate Coach. Going it alone is not easy. Take the time to find a mentor who can help you steer through some of the known obstacles and help you during the “peaks and valleys.” If you have the resources, you may wish to hire a real estate coach or an executive coach who specializes in small business help and sales.
Being an incredible sales person and entering the real estate market does not guarantee similar sales success. However, these 7 tips may help you avoid many of the pitfalls by not being one of the four real estate agents who quit within one year or one of the nine who give up after 3 years.
The Advantages And Disadvantages Of Investing In Real Estate
There are many advantages and disadvantages of investing in real estate. One of the advantages of investing in real estate is; real estate is an investment that can give you income for the rest of your life. If you buy properties and rent the properties out it can give you life long income. Another advantage of investing in properties is you can use a lot of leverage to acquire them. There are many ways you can buy properties without using your own money. One way of doing this is seller financing. Seller financing is when you agree to pay the seller over time the down payment and the rest you get from the bank.
One last advantage of investing in real estate is real estate has intrinsic value to it. A stock that you buy can lose 99% of its value but it is almost impossible to buy a property and it loses 99% of its value. One disadvantage of investing in properties is if you buy a property and can’t make the mortgage payments you can lose the property and damage your credit. Another disadvantage of investing in properties is, as an investor you depend on a lot of people to do their part. If the people you are renting out to do not pay their rent you will have to use their security money and find new people quickly or it can eat up your profits.
One last disadvantage of investing in properties is the cost it takes to maintain or repair. Many times when you think you’re done with a property something can break or needs to be replaced. Investing in properties does have its advantages and disadvantages. If you use the information you read here you will have some idea of what the advantages and disadvantages are.
Posted in Financial Brokers Articles | 
Tags: Advantages, Disadvantages, Estate, Investing | 
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Automated Stock Trading Software – How to Choose the Best
Get the Information You Need to Evaluate Stock Trading Software
In today’s market, investors are wondering if they should even buy stocks and if they can make money. The answer to both is “yes.” Stock market trading is a wonderful opportunity now, with prices lower and volatility higher than in many years. Stock trading online has never been more popular.
Automated trading platforms, robotic trading programs, online day trading systems-there are many terms used to describe the stock trading systems that can help you to make a stock investment and to grow your money. Review the criteria below and understand your own personal preferences by talking with other stock traders. Identify the facts you need to compare programs. You’ll need a good understanding of the automated trading tools’ features and costs before you make a decision.
Many types of companies offer stock trading advice and stock trading strategies. They run the gamut from educational programs that aim to teach you how to trade, to a list of recommended stocks to buy and sell at certain triggers, to brokerage firm proprietary software, all the way to fully automated robotic software. Prices can vary from thousands of dollars to less than $50 a month for some auto trading software. With such a variety, how do you choose? This article will guide you through the features and benefits of the programs that are available for online stock trading. We will not discuss trading software for options or Forex trading. Many of the programs are geared towards “day traders,” who technically open long positions (buy) or short positions (sell short) and close these positions the same day. Not everyone who uses these programs closes out their positions by the end of the trading day–sometimes they hold their positions for days, weeks or months. We’ll call this “active trading.” Sometimes this is also referred to as “swing trading.”
The essential features of a stock trading program include a data feed for stock quotes and indicators, stock charts or charting capability of major indicators, current balance and positions and an order entry system. The order entry system should allow stop (loss) orders, stop limit orders and trailing stops. A trailing stop limit is similar to the stop (loss), except its loss will be measured from the stocks highest point achieved. The preferred method would be to keep the trigger prices in stealth mode, not viewable by the market makers, rather than as actual orders. Most automated trading software should include a watch list of the stocks to potentially trade based on the parameters the stock trader has entered.
Exchange Traded Funds (ETF’s) can be part of an efficient trading strategy. These are mutual funds that are traded intraday on the stock exchanges, unlike traditional mutual funds that are a basket of securities priced at the close of the market. Online stock trading systems should also include trading capabilities for ETF’s.
Other features to look for include safety measures that stock traders may take, such as establishing a profit goal–the minimum price increase a trader would expect a stock to gain before closing their position. Also highly desirable is a form of profit protection for your investments, which is the reduced profit goal. After the stock reaches its profit goal and continues to rise, the stock trading software should wait and let the profit increase. If the stock price decreases or pulls back, the online trading program should close the position and lock the profit. This pullback value should not have any effect before the profit goal is reached and is intended to improve stock performance. More sophisticated auto trading programs will also offer the percentage gain from stock trader’s entry price, and the trader can also specify a minimum amount in case the percentage gained is too low.
Check the Features and Ask Questions
Number of Technical Indicators – There are literally hundreds of indicators that stock traders can use to determine which stocks to buy and sell and when. The most robust programs will offer hundreds of indicators for technical analysis, such as Bollinger Bands, and some will even include indicators for Candlestick Chart formations. Robotic programs use these indicators to set conditions under which online investing will occur.
Complexity – Automated stock trading programs vary greatly in ease of use. Some online stock trading systems do require actual programming expertise. Others are simply point and click. Check out the online demo to see that it fits your level of comfort before making a commitment. Talk to others who are currently using the auto trading websites and check out their online communities for more comments.
Number of Long and Short Strategies Per Account – Due to the size of the online trading platform, there may be a limit to the number of strategies that you can have loaded on each account. If you want to run, say two long trading strategies, then you may need two accounts. Also confirm if you have enough memory on your computer for two or more accounts. Experienced active traders may run two or more live long and short strategies, while having additional accounts for strategies that they are testing in a simulator mode.
Find Out How Advanced Your Software Can Be
Recommended Additional Features – The best automated stock trading software will include additional features that active traders will find invaluable once they have begun automated trading.
Additional strategy and order entry features include the ability to add to a position as a stock goes up, or as the stock declines, as well as a minimum purchase interval that the stock price should drop before it begins purchasing additional shares. A maximum bid/ask range will also be helpful, as the size of the spread can directly impact a swing trader’s ability to make profitable trades.
If there are hundreds of indicators, as is the case with robotic traders, see if the definitions of the indicators are readily available. The definition or formula for indicators may vary from one electronic trading platform to another, so be sure you understand them first.
Recommend you have a program that displays current Profit and Loss (P&L) on your open positions and the status of the rules on your watch list. For example, if a stock on the watch list hasn’t traded, is there a feature where the trader can pull up the rules and indicators to see which one(s) is preventing the trade?
Some automated stock trading programs visually display the percentage of symbols up and down in each sector from the specified time frame to the current time so you can see how the market is turning. Does the platform include the ability to block certain symbols from trading? If you’re running a long trading strategy, you won’t want to be buying ETF’s that short the market.
Day traders will want automated trading software that tracks and displays the number of day trades remaining. Day trading is regulated by the SEC, so it’s important to understand if you will be day trading first.
Orders in Stealth Mode – A standard feature of many trading software programs is the ability to enter limit, stop and stop limit orders. While it is important to have an exit strategy from your positions, telegraphing it to the institutional traders in the form of publicly viewed limits is not. It’s a little like poker–whoever can see all the hands has the advantage. Instead, newer programs allow the user to enter these price points in the auto trader system, but trigger a market order when the conditions are met. This is one advantage of a truly robotic stock trading program.
Automatically Executes Your Trading Strategy Even While You’re Away From Your Computer – Very few stock market trading systems can actually do this. For those that do, it’s done based on the trader selecting technical indicators, comparison operators and numerical inputs that will activate opening, adding to, or closing stock positions. Essentially, it’s a rules driven software system. The trader can select from hundreds of historical indicators representing the stocks’ previous conditions. The indicators should be updated daily using the latest data. Programs that can trade automatically are the cream of the online investing software crop. They take the emotion out of investing. Long time traders report that the simplest strategies, when left to run on their own for long periods perform best. The program should also have a manual override so the stock trader can manually place a trade as well. Specifically ask if the system has this capability. Many market themselves as “automated trading” but are not truly automated.
Ability to Simulate Strategies In Real Time Before Running Live – Most traders would agree that they’d like to “test drive” a system before using it. Some programs allow this through “back-testing,” in which the program uses past data to execute the trades and show you what they would have been. This is not always accurate, as there is much data needed to perform a thorough back-test and it’s nearly impossible to replicate all the circumstances with just the historical data. In addition, how the system performed in a market last month or last year does not indicate how it will perform in the here and now.
There are a few systems that allow the stock trader to simulate strategies, but this is done mostly with paper tickets, rather than through the software package. The best stock trading software will let you practice stock trading using a live real-time data feed during market hours. This is the preferred method, as it gives traders a very realistic view of how their trading strategy is performing and the ability to feel the highs and lows of daily trading without investing real money. If you can simulate trades, you won’t need to open an actual brokerage account until you go “live” with real money. Ask if there is a limit on how long you can run in the simulation mode.
Shows You How to Create A Stock Trading Strategy – There should be a step by step walk through to show novice traders how to create a trading strategy. Are there off-the-shelf strategies that are available for your use? Are there any fees involved or are they offered for free? Can you modify the off the shelf strategies? Note that firms should not be guaranteeing you a certain return. The best firms will have long and short stock trading strategies available at no charge and will allow the stock trader to create their own. Some firms will even allow you to copy strategies from a “friends” list. One size does not fit all. If the company doesn’t tell you the details of the strategy or why they selected or recommend a certain stock, then it’s not advisable to use it. You may overpaying for “proprietary” services and may be able to obtain free stock market tips and recommendations online that will perform comparably.
Tech Support and Customer Service – The best automated stock trading software firms have an extremely high “up-time” and are very rarely out of service. Check on the firm’s record–how often have they had outages? The software should be easy to install and should work with a variety of operating systems (Windows XP, Windows Vista, etc.). If you have questions, is there a knowledgeable and helpful staff to provide service? How quickly do they respond, if by email?
Commissions – Trading commissions can eat into your profits if you are not careful about choosing a plan that fits your needs. Commissions can vary greatly from broker to broker, depending on the number of shares traded, whether the shares are in round lots of 100, price of the shares traded and the number of trades you place each month. Stock traders may even want to have more than one account if they have a trading strategy that normally trades 100 shares lots and another that trades 1000 share lots. It pays to read the fine print.
Number of Broker Choices – If you have a proprietary brokerage software product, then you’ll only be able to trade through that firm. The best online trading includes the lowest commissions for the typical trades for each strategy that you use. There are other programs whose software has been integrated into the order placing functionality at a variety of brokerage firms. Commissions will be one consideration in choosing a firm. Another is the margin rates. If you choose to have a margin account and borrow against the value of your securities to open more positions, you will be charged margin interest. Rates will vary by firm. Typically, firms with the lowest commissions won’t pay you interest or offer a money market fund for your uninvested cash. This is how they keep their costs down. If you anticipate having extra cash that you won’t use for trading, you may want to keep it in another account where it can earn more. You should also check if there is a minimum to open an account or a minimum number of trades required.
Check the Costs and Software Support
Initial Software Fee and Monthly Fees – Ask is there is an initial fee to buy the software package. Is it thousands of dollars? If so, find out what you are really getting. Much of what you can obtain from some of these programs can be found in inexpensive books or on the Internet for free. Is there also a monthly fee? If so, what does it cover? In reviewing online trading services, more expensive software is not necessarily better. Some active investing services are less expensive because they have more subscribers.
Data Feed Fee – Does the program include real time data feeds for stock quotes and indicators? Is there an extra fee for this or is it included in the basic monthly fee? This is the biggest component cost in developing automated stock trading programs. Or, is the data delayed by 20 minutes? Is it only the end of day data? If so, even in a simulation, old data is not good data. Many brokerage firms offer free Level II quotes to qualified active traders who trade a specified number of trades each month.
Stock Charts Fee – How will you review the major indicators that you’re using to make trading decisions? Some programs include stock charts with their fee, others charge a separate fee for it. Depending on the platform you choose, you may or may not need a charting package. Find out how much is it and how much you can customize the stock charts to track your favorite indicators.
Ongoing Support Fee – Ask is there are any other fees. Hidden fees will definitely each into a stock trader’s profits. If you’re not in the market to make money, then you shouldn’t be in the market.
Long Term Contract – Is the fee you’re paying upfront for a year’s contract? If so, is it automatically renewed every year?
Training Fee – Find out if there is a separate training fee. For programs that market themselves as financial educators, there will be a fee, sometimes hundreds or thousands of dollars, as this is how they make their money. The best automated stock trading software programs provide free training.
Training Formats – Is the training in the form of a live seminar? Webinar? Are there extra materials such as DVD’s that you must buy to find out all the information advertised? Or, is live training available in the company’s office?
Minimum to Invest – Brokerage firms have their own minimums but there are also account minimum balances required by the Securities and Exchange Commission (SEC) for what it calls “pattern day traders.” A day trade occurs when a trader opens and closes the same position in a margin account on the same day. A pattern day trader is any person who executes 4 or more day trades within 5 business days in a margin account, provided the number of day trades is more than 6% of the total trades in the account during that period. All pattern day traders must maintain a minimum of $25,000 in equity at all times.
System Requirements – The more robust the trading system, the greater the memory requirements. Check this before you sign up or purchase a new computer. If you sign up for more than one account, will your machine have enough RAM to run both or will you need to purchase an extra computer or more memory? If you have a Mac, ask if the software works on Mac, as not all do. You may want to have one computer dedicated only to your automated stock trading programs and not run other word processing or spreadsheet programs.
Reports – The best automated stock trading software will include a reports function, that allows the stock trader to pull up trades by time frame, security, long vs short, open vs. closed and P&L. For truly active traders, this information is an easy way to track trading for tax purposes.
Trading Strategy Statistics- In addition to Reports, another great feature is strategy statistics. They will tell the serious stock trader the number of trades executed and break them down by profitable vs. unprofitable over various intervals. Reviewing the strategy accuracy increases the odds that a stock trader will be profitable.
Online Trading Community – Trading platform developers who are truly proud of their work welcome comments and questions from users. Take some time to read their stock trading forum and see what other stock traders are saying. There are even a few automated stock trading programs that will take requests for additional indicators from their users.
Take the Right Steps as You Choose Stock Trading Software
Be wary of those who tell you that you must follow their stock trading system using only their tools. This is about you having control over your financial future. There are as many successful stock trading strategies as there are active traders. Experiment, talk to others and do research. You will find what works best for you.
Use caution when signing up for anything long-term, even if a 30-day free trial is offered. Some firms may request a large down payment or full payment in advance and pressure you on the spot, promising a discount if you sign up immediately. Some consumers have reported difficulty in obtaining refunds even when they have followed the procedures exactly.
Happy trading!
© Copyright – Regina Guinn. All Rights Reserved Worldwide.
Find the Best Mortgage Refinance Companies
There are very many mortgage refinance companies in the world today. You can choose from private companies or public companies. You will find that one type of such companies will have the backing up of a bank. Financial institutions have also been known to be joining the mortgage refinancing sector. You might be having a problem when finding such companies.
The process to get one of the good mortgage refinance companies is illustrated below. Research would be the first step. Of the companies that are in your area, find out which of them have had the least number of disagreements with their clients.
A company that has had very few disagreements is a company that one can trust. It means that they are serious about their business and they give their clients satisfaction. You can also check their duration in the business. Due to the high level of cons that have been happening all over, it would be prudent to choose a company that has been in business for several years at least.
This will give you security when you are dealing with them. It also means that they have been in the business long enough to able to know the pros and cons of the business. The mortgage refinance companies that have been in the business for long have a higher chance of having the best interest rates in the market.
Alternatively you can inquire from close relatives and friends on which mortgage refinance companies they have used. Having had first hand experience with a company, a relative or a friend can be able to direct you on the do’s and don’ts of mortgage refinancing.
They can be able to tell you of their experience with certain companies this can help you in saving time that one would use to physically find out for themselves the history of a certain company. They may also warn you on companies that they have had a bad experience with. Another method that one can find a mortgage company is through the internet.
There are very many online mortgage companies that can be found on the internet. From these sites you will be able to find which companies will work best for you. You can contact them and inquire with a few questions before you make up your mind. Online refinance companies are easier to research as they are on the internet and in a few hours you will have gotten one that suits you.
Characteristics of Depreciation, Basic Factors of Determination of Depreciation
Characteristics of Depreciation
Depreciation has the following characteristics:
(1) Depreciation is charged in case of fixed assets only, e.g., Building, Plant and Machinery, Furniture ‘etc. There is no question of depreciation in case of current assets-such as Stock, Debtors, Bills Receivable etc.
(2) Depreciation causes perpetual, gradual and continuous fall in the value of asset
(3) Depreciation occurs till the last day of the estimated working life of asset
(4) Depreciation occurs on account of use of asset In certain cases, however, depreciation may occur even if the assets are not used, e.g., Leasehold Property, Patent right, Copyright etc.
(5) Depreciation is a charge against revenue of an accounting period.
(6) Depreciation does not depend on fluctuations in market value of asset
(7) The amount of depreciation of an accounting year cannot be determined precisely-it has to be estimated. In certain cases, however, it may be ascertained exactly, e.g., Leasehold Property, Patent Right, Copyright etc.
(8) Total depreciation of an asset cannot exceed its depreciable value (cost less scrap value).
Basic factors of determination of depreciation
(1) original cost of fixed asset i.e., purchase price plus freight and installation expenses;
(2) estimated amount of expenditure on repairs during the useful life;
(3) estimated useful life of asset after which it will be discarded;
(4) estimated residual or scrap value;
(5) interest on investment-the amount invested on purchase of asset, if it had been invested in some other investment what interest would have been earned;
(6) possibility of obsolescence.
Fixed Installment or Original Cost or Straight Line Method, reducing/Diminishing Balance method
Under this method depreciation is not calculated on cost of asset. It is computed on the book value. of asset. The book value of the asset is obtained by deducting depreciation from its cost. The book value of asset gradually reduces on account of depreciation charge. Since the depreciation percent rate is applied on reducing balance of asset. this method is called reducing balance or diminishing installment method or written down value method.
Merits and demerits.
Declining balance method not only equitably matches depreciation expenses against the related revenue but also fairly spreads. the incidence of depreciation and repairs (viz higher depreciation but heavier repairs in later years.) on profit and loss account over the assets life span. Elimination of major portion of cost in early years also minimizes the impact of obsolescence. It is equally useful to management as accelerated depreciation means smaller taxable profits and taxes hence lesser outflow of cash.
Accelerated Depreciation Methods
Sum-of-the year’s digits (SYD). This method of depreciation accelerates depreciation expenses so that the amount recognized in the earlier periods of an asset’s useful life are greater than those recognized in the latter periods. The SYD is found by estimating an asset’s useful life in years, then assigning consecutive numbers to each year, and totaling these numbers. For n years,
SYD = 1 + 2 + 3 + 4 + … +n
Annuity Method
The method recognizes the time value (Interest) of money and hence regards the real cost of using a long-lived asset equivalent to the actual amount invested thereon plus the interest lost on the acquisition of asset. Under this method, so much depreciation is written off each year as after debiting the asset account with interest upon the diminishing value, will reduce the asset to nil at the end of its life. Thus, the amount written off as depreciation is the same every year, but the interest will diminish each year.
The amount of annual depreciation to be written off by Annuity method will be ascertained from Annuity Tables
Depreciation Fund method or Sinking Fund method
Under this method, a fixed amount is charged as depreciation every year. It endeavors to provide the required lump sum cash at the retirement of a long, lived asset by annually setting aside and investing a fixed sum in readily realizable securities. These securities earn interest at fixed rate and the same being reinvested along with successive fixed installments of depreciation, allowed to accumulate at compound interest. The sinking fund method thus takes into account of this probable income from interest while fixing the annual depreciation and investing the same which together with compound interest accumulated to the asset’s depreciable cost by the end of its useful life. Obviously, the fixed installment of annual depreciation is here smaller as compared to straight line method. Its magnitude, however, rests on the asset’s life span and interest rate. Longer the span and higher the rate, smaller is the annual depreciation per rupee of depreciable cost.
Shortcomings of Depreciation Fund Method
Depreciation fund method assumes constant rate of return on every periodic investment in identical securities. This is hardly true in this dynamic world where rates do vary now and then. Any variation in the rate of return upsets the earlier periodic allocation for depreciation and entails refection thereof. Further the amount realized on the sale of security rarely agrees with its acquisition cost owing to made fluctuations which may be both erratic and considerable. Those may cause a wide gap between the required and supplied cash.
Insurance Policy Method
This method endeavors the supply of required cash at the retirement of a specified asset in return of periodic contribution (premium). Under this a trader takes a ‘Capital Redemption Insurance Policy’ from an insurance company which undertakes to pay at a given date a certain sum if the trader, paying a fixed number of premiums after regular intervals. The trader treats the periodic payment as depreciation and charges it to profit and loss account. In this case, depreciation is charged at the end of the year, whereas, the premium is paid at the beginning of the year. At maturity, the insurance company pays the policy money which is normally sufficient to replace the retired set. Normally, amount received is more than total premium paid as the policy yields interest.
Revaluation Method
Under the system, each year the asset is valued and the value is compared with that in the beginning of the year. The fall is treated as depreciation. Suppose if the value of the tools at the beginning of the year was Rs. 8,000, during the year tools worth Rs. 6,000 were purchased and at the end of the year, on valuation these amounted to Rs. 11,000. The amount of depreciation for the year will be : 8,000 + 6,000-11,000 = Rs. 3,000 . This method is useful for charging depreciation on livestock and loose tools.
Depletion Method
Natural resources include physical assets like mineral deposits, oil and gas resources and timber stands. These natural resources get exhausted by exploitation. In some cases, the reduction in physical deposits is offset by growth or development of additional deposits.
The cost of natural resources is the price paid for its acquisition plus price paid for development of such asset in order to bring it to a state suitable for production.
The periodic depletion is better not calculated in terms of year. Rather it is better to calculate the cost per unit and then multiply the cost of unit to units produced in that particular year.
Machine Hour Rate
Under this method, the total number of working hours of a machine during the whole of its effective life is estimated, and then the cost of machine is divided by the expected number of hours of useful life, this gives the rate per hour. The annual depreciation is calculatedly multiplying this rate by the number of hours, the machine actually runs in a year.
Mileage Method
This method is used only for those assets whose useful life depends upon the fact that how many kilometers they have been driven e.g. buses, cars, trucks and rolling stock etc.
Global Method
Under this method, the value of the assets, irrespective of their nature is added together and depreciation is charged at an average rate on aggregated value.
Choice of a Method
Aforesaid methods of depreciation reveal that none is absolutely best or worst as each method has its own merits and demerits. Suitability of every method is relative and depends upon various factors. Most important of these are the type of the asset and purpose of depreciation.
Straight line method suits to buildings and lease etc.. reducing installment method fits to machinery equipment etc. and depletion method for wasting assets like mines. quarries etc. However, the underlying purpose is the basic determinants of the propriety of a depreciation method. Important purpose comprise of true reporting of accounts, tax benefits, comparative product cost, financial flexibility, replacement and expansion etc. For example. depreciation fund method envisages that the amount set aside for depreciation is to be invested outside the business in specific securities. Similarly under insurance policy method, the amount so set aside is handed over to insurance company. If a business is having working capital problems the advisability of these methods is questionable.
Of the above-mentioned methods (1) Fixed Installment and (2) Reducing Installment methods are most widely used.
Distinction between Fixed Installment Method and Reducing Installment Method
Fixed Installment Method
1. The rate and amount of depreciation remain the same each year.
2. Depreciation rate per cent is calculated on cost of asset each year.
3. At the end of its life the value of asset is reduced to zero or scrap value.
4. The older the asset, the larger the cost of its repairs. But the amount of depreciation remains the same each year. Hence, the total of depreciation and repairs increases every year. This reduces annual profit gradually.
5. Computation of depreciation comparatively easy and simple.
Reducing Installment Method
1. The rate remains the same, but the amount of depreciation diminishes gradually.
2. Depreciation rate percent is calculated on book value of asset.
3. The value of asset is never reduced to zero at the end of its life.
4. The amount of depreciation decreases gradually, while the cost of repairs increases.
So the total of depreciation and repairs remains more or less the same each “year. Hence, it causes little or no change in annual profit/loss.
5. Depreciation can be computed without any difficulty, but it is not so easy and simple.
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Government Grants for Disabled Veterans
The United States troops are the heart and soul of the nation. They deserve our respect and gratitude because of their endless efforts to protect the American way of living and uphold freedom. Unfortunately, being a soldier exposes you to so many dangers. Thousands of soldiers have lost limbs in battle and were sent home because they can no longer serve the armed forces. These circumstances may cause serious trauma and can hinder these soldiers from getting back on their feet. Fortunately, disabled veterans draw a lot of support and attention from the US government. Because of this, the government designed grants especially for disabled veterans. One of them is the housing grant for veterans.
Housing grants
The problem with some war veterans is that once they are back home, they do not have their own place to live in. This can be a huge burden, especially for those who are disabled. Fortunately, the government can offer them a housing grant.
There are a number of requirements needed in order to get a government housing grant. They are:
? Has served within any branch of the armed forces of the United States on or after September 16, 1940.
? A valid social security number
? A certified American citizen
You may go to the regional office of the Department of Veteran Affairs to apply for this grant. There will be no need to fill out any application form for each applicant will be attended to properly right away. Now, if ever you are denied of this grant, you may still be able to file an appeal. It is recommended that you file this appeal once you are informed of the denial of application.
Aside from the government, there are also different non-profit organizations that aim to help the housing of war veterans that are recognized by the state.
Financial Help For Single Mothers
Financial aid for single mothers is available either through federal welfare services or through private organizations.
Who is qualified?
Not all single mothers can take advantage of special financial help packages. Only those whose earnings fall below a certain level are considered low-income individuals and qualify for welfare benefits. To find out if you qualify for and may avail yourself of federal welfare services, you must complete the application form available at your local welfare office.
Each program has its own income limits. Whether or not your income falls within the limit depends on the type of income you have, your family’s expenses, and any other special circumstances your family may have. Each program also has resource limits. Things that can be converted to cash (bank accounts, stocks, and other properties) are considered to be resources. Only certain non-U.S. citizens may receive welfare benefits. Check with your local office for details.
What happens if you are not qualified?
If you do not qualify for welfare benefits, or if your needs are not covered by any specific welfare program, you may take advantage of grants offered by the U.S. government to single mothers. In exchange for the grant, you must perform some service or task required by the grant terms. There are 900 grant programs offered by 26 federal grant-making agencies. Some grant categories are agriculture, art, and education. You may visit http://www.grants.gov and http://www.neh.gov for details on grant application.
Other sources
Many schools offer scholarships specifically to single mothers. In order to find out about these, you may visit the financial aid office of the school you are currently attending or wish to attend.
There are also some private organizations that give grants and financial assistance to single mothers. Singlemom.com has a “financial gifting program.” It awards cash grants to deserving single mothers every month. Many other similar organizations have grant and financial aid information on the Internet.
Home Insurance – Your Financial Protection Against Accidents and Losses
Home insurance stands as an important policy in the UK since it provides financial protection in the events of damages or losses due to various reasons. It could be natural disasters such as earthquakes, hurricanes, storms, hail, sleet, floods, accidental fires or the like. Sometimes human miscreants can also be at work such in cases involving arson and of course, theft is a common reason. There are numerous other problems as well such as frozen pipes, snapped wiring. Accidents can happen anytime and losses can eventually occur due to various reasons.
And one needs to be prepared for such losses by taking out a home insurance policy in the UK. And the way it caters so well to the requirements of homeowners to deal with various uncertainties, this policy is also known as homeowners insurance in the UK. It is obvious that one’s house, one’s very home is dear to all of us; sometimes a lifetime of earnings goes into building or buying a house of one’s dreams.
Home insurance UK provides for not only the physical infrastructure, that is the building but also for the other valuables you have inside your house, namely your jewellery, furniture, important documents, electronic goods and appliances and so on. The percentage of coverage for the contents within the house varies, so it is advisable to calculate the costs of your valuables which should determine the amount of coverage you would need. Also this would affect your premium rates payable on each term.
When you go for this insurance policy, another important thing to decide is the time period for which you would like to get the privilege of insurance coverage. And then, there is also the option of perpetual insurance that is not fixed for a fixed term. Both types of duration-specific home insurance policy are available in most areas in the UK as well as online these days.
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