what is the difference between straight line and reducing balance depreciation?
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The main difference between the reducing balance and straight-line methods of depreciation is that while the reducing balance method charges depreciation as a percentage of an asset's book value, the straight-line method expenses the same amount each year.
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As we mentioned above, depreciation is not a current asset. It is also not a fixed asset. Depreciation is the method of accounting used to allocate the cost of a fixed asset over its useful life and is used to account for declines in value. ... Current assets are not depreciated because of their short-term life.
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The key difference between Trial Balance vs Balance sheet is that Trial Balance is the report of accounting in which ending balances of different General ledger of the company are presented into the debit column or the credit column, whereas, Balance sheet is one of the financial statements of the company which ...
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The key difference between amortization and depreciation is that amortization is used for intangible assets, while depreciation is used for tangible assets. ... Finally, because they are intangible, amortized assets do not have a salvage value, which is the estimated resale value of an asset at the end of its useful life.
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Asset accounts normally have debit balances, while liabilities and capital normally have credit balances. Income has a normal credit balance since it increases capital . On the other hand, expenses and withdrawals decrease capital, hence they normally have debit balances.
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Equipment is an asset and a debit will increase the account balance. You would have to CREDIT Equipment in order to reduce its balance. A credit will decrease this asset's account balance. Unearned Revenue is a liability account and its balance will be decreased with a debit.
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Fixed assets have a debit balance on the balance sheet. By having accumulated depreciation recorded as a credit balance, the fixed asset can be offset. In other words, accumulated depreciation is a contra-asset account, meaning it offsets the value of the asset that it is depreciating.
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Total balance is just the current amount in your bank account (This does not include cheque deposits or withdrawals or any other kind of transactions which is still in the process of clearing). Whereas clear balance is the amount in your bank account after taking in to account every pending transactions.
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Depreciation expense for a year under the straight-line method is calculated by dividing the depreciable amount (the difference between cost and salvage value) of the fixed asset by its useful life (in years). Depreciable amount equals cost minus salvage value.
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In flat interest rate method, the interest rate is calculated on the principal amount of the loan while, the interest rate is calculated only on the outstanding loan amount on a monthly basis in the reducing interest rate method.
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There is an important difference between "depression" and "deflation." ... So in summary, deflation refers to a drop in prices, whereas a depression represents a very severe and prolonged reduction in total economic output (i.e., all the goods bought and investment undertaken in the whole economy).
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A debit increases asset or expense accounts, and decreases liability, revenue or equity accounts. A credit is always positioned on the right side of an entry.
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As we mentioned above, depreciation is not a current asset. It is also not a fixed asset. Depreciation is the method of accounting used to allocate the cost of a fixed asset over its useful life and is used to account for declines in value.
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As stated earlier, in most cases, depreciation and amortization are treated as separate line items on the income statement. Depreciation is typically used with fixed assets or tangible assets, such as property, plant, and equipment (PP&E).
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Difference Between Fixed and Fluctuating Capital Methods Both Capital and Current Accounts appears in the Balance sheet. Only Capital Account appears in the Balance Sheet. If this method is used then it must be specified in the Partnership Deed. Fluctuating Capital account may show debit balance as well.
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It is also important to remember that the slope of the budget line is equal to the ratio of the prices of two goods. ... Now, the quantity of good Y purchased if whole of the given income M is spent on it is OB. It is thus proved that the slope of the budget line BL is equal to the ratio of prices of two goods.
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Items reported. The balance sheet reports assets, liabilities, and equity, while the income statement reports revenues and expenses that net to a profit or loss. ... They use the income statement to decide whether a business is generating a sufficient profit to pay off its liabilities.