Depreciation

Defintion of Depreciation

Depreciation is a method used according to dedicated Standard in relation to accounting that is entitled IAS 16 Property, Plant & Equipment. In this Accounting Method Cost of the long-term tangible asset (which has physical existence and will be useful for business for more than one year) is spread over the useful life of that tangible asset. 

Why an Asset should be depreciated:

Business needs to depreciate assets for the purpose of compliance with Accounting Practices & Standards. Every business which complies with International Accounting Standards or Generally Accepted Accounting Policies (GAAP) need to follow IAS 16 Property, Plant & Equipment which requires them to show the long-term assets after deducting depreciation. It takes the concept that as an asset is employed for the intended use, its value over the period of time will decrease because of physical wear and tear, obsolesce and even when if an asset is not used its value will decrease as new technology will replace the technology used in the asset.

Over and above, Tax Authorities in different countries (like Inland Revenue Service in U.S.A) may require businesses to show their depreciation. This could give business tax benefits as the purchase of these Assets may be a tax deductible expense in the jurisdiction.  The company does not have to pay taxes on depreciation which benefits the cash flow of the company.

The cost of an Asset:

The cost of a particular asset includes all the relevant and related costs which are required in relation to bringing the subject asset to its location for the specified purpose of use. This will include costs like purchase price, transportation, installation.

Useful Life of Asset:

The useful life in relation to an Asset shows the particular life cycle of that very asset in consideration. If a business purchases an asset it should take into account the period of in which the asset can contribute to production and give economic benefit to the organization before it becomes obsolete and has no economic value. The useful life will be different for assets of different categories as the duration during which they can give benefit will be different will be different for each asset. For example, the useful life of a car will be higher than that of a laptop because new technology will make laptop obsolete quickly than in the case of a car. The useful life of the building will be higher than of car as its decrease in value occurs very slowly than that of the car.

Depreciation of Land & Land Improvement:

The land is not depreciated as its useful life is indefinite. However, Land Improvements like roads have limited useful life so they are to be depreciated according to their useful life.

An example of Depreciation:

A business purchases a vehicle for $1200. The useful life of the vehicle is 4 years. How to calculate its Depreciation at the end of third year and value after the third year.

The above is an example of one of the most practiced depreciation technique that is Straight Line depreciation. The corresponding quantum of the amount of depreciation will be same in all of the subsequent years.

Depreciation for one year: Total Value of Asset/ No of Useful life years of Asset

=$1200/4 =$300 the amount of Depreciation per year.

Accumulated Depreciation after year three: No of Years* Depreciation of one Year

=3*300 =$900

The remaining value of Asset: Cost of Asset – Accumulated Depreciation =$1200-$900 =$300.

Your Words shape your child future

Your Words shape your child future

Yes, it is a no-brainer that your words have real time power to shape the future of your child. Words are the primitive tool that is used to communicate. This implies that they have the power to influence the thing we desire. In order to make our message more effective, we resort to editing and proofreading our message and therefore we are actually increasing their potency to achieve what we desire real-time. This means that your words have a real-time influence on your child’s behavior, the attitude in the future.

In some religions like Judaism and Islam, it is believed that words have an effect even when the child is still in the development process in the womb of the mother and can hear and affected by what his or her mother is going through at a particular point in time. Words have direct power in relation to the development of the brain, cognitive growth and thus have a primary role in shaping the literacy skills of the specific children.

Parents Influence and Child Development

Parents have significant influence in relation to the child development. The style which parents resort to in relation to the upbringing of the children is pertinent to understand. The parents who used shout at their children compromises on their children’s confidence levels and they used to fear to do anything or to believe their innate capacities and abilities. Parents who are particularly engaged in their professional activities and let the babysitters care for their children compromises on their children cognitive development as babysitters would have little concern in relation to sharing life experiences and expectations.

Parenting styles and Growth, Development of Children

Enlisted below are primary parenting styles followed by their respective influence on the growth, nourishment and the development of the children.

Authoritative

It is regarded as the best and successful approach. There is the quantum of involvement along with the respectable control level as well. There is design in relation to the expectations along with the constraints and limits. In this parenting style, the children are used to provide with the natural consequences in relation to any particular event. The rules are designed and reasons are set out and there is a fair element of flexibility.

Authoritarian

In this style, there is a significant emphasis in relation to obedience and confirmation of the parent's instructions. There is design in relation to the rigid rule with no flexibility element followed by the firm consequences. Children experiencing this parenting style are researched to observe self-esteem and anxiety issues.

Permissive

There is warmth, there is love but there are no rules and there is no use of the reinforcement or punishment. Children experiencing this parenting style are researched to be lacking self-discipline and are shown to be indulged in relation to impulsive behavior such as alcohol addiction and inappropriate and risky sexual activities real-time. 

Uninvolved/neglectful

This style is primarily characterized by the indifferent and approach of ignoring. Such children are primarily anxious with poor performance in relation to their academics. Words certainly have very important role in our lives to play and they do have effect and thus have the ability to significantly influence the potential personal and professional life of your children. It is important to have a parenting style that is conducive to the growth of your children. A good parenting style makes use of the right words and right approach and thus is real-time helpful in shaping the future of your children.  

Nvidia GeForce GTX 1080 Ti

Nvidia GeForce GTX 1080 Ti

With gamers a little disappointed by the Vega and AMD, Nvidia makes the mark in the market by the introduction of the GeForce GTX 1080 Ti. It is not just another random performance bump but it is in real-time quite close to the Titan XP. By officially introducing the GeForce GTX 1080 Ti, Nvidia set the competition stage on fire.

Nvidia GeForce GTX 1080 Ti Specifications

In terms of the specification, the product is quite close to the Titan XP. The evidence to this fact is that in terms of the core they are on the equal scale. GTX 1080 Ti comes with the powered video memory and that is whooping 11 GB of the video memory. In terms of the shader processors, the GeForce GTX 1080 Ti is almost at par with the Titan XP. However, it is characterized by a little contained quantum of the Render output units (ROPs) in comparison to the Titan XP. It has increased capacity in relation to the clocking frequency. These are the key highlights in relation to the GeForce GTX 1080 Ti that has staged the new competition in the market.

Nvidia GeForce GTX 1080 Ti Price

Nvidia has promised that the product would be soon launched in the market and you will not have to wait much for that time to arrive. The price that will be set for this all new appealing version would be $699. On the other hand, the previous version that is GTX 1080 would be hit with the price cut and that would be around $100 with new price at the level of just $499.

Nvidia GeForce GTX 1080 Ti and Titan XP

Lets precisely compare the specs of the GTX 1080 Ti with the previous version that is GTX 1080 along with the Titan XP as well. In terms of Price, GTX 1080 Ti is economical than the Titan XP. The former would be feature for just $699 whereas the later is tagged as $1,200. In terms of the Graphics processing units, all are almost equal with GTX 1080 Ti and Titan XP scoring up to 102 GPU; however GTX 1080 is at 104 GPU. GTX 1080 Ti has very competitive RAM and that is 11 GB which is quite close to what is offered by the Titan XP (12 GB). Other featured specifications of the compared products are given below in the following picture. 

Hopefully the chart is conclusive enough for you to decide in favor of the Nvidia GeForce GTX 1080 Ti.With gamers a little disappointed by the Vega and AMD, Nvidia makes the mark in the market by the introduction of the GeForce GTX 1080 Ti. In terms of the specification, the product is quite close to the Titan XP. The evidence to this fact is that in terms of the core they are on the equal scale. Nvidia has promised that the product would be soon launched in the market and you will not have to wait much for that time to arrive. The price that will be set for this all new appealing version would be $699 and the previous version that is GTX 1080 would be reduced in catalogue price which would be around $499 only.

Altman Z-Score

Altman Z-score is another important metric in relation to the financial analysis of the financial statements with regard to specific organization. You have read and understood the various metrics in relation to liquidity and solvency followed by leverage and liquidity, activity to have a precise assessment of the financial health of any organization. Altman Z-score integrates all those metrics in one formula which can be utilized to effectively test the likelihood of the bankruptcy for any manufacturing concern.

Altman Z-score is actually based on five important ratios that used to be computed from the company’s financial statements. The lower the score the higher is the probability in relation to the company going bankrupt.

Formula of the Altman Z-Score

The formula for the Z-Score can be demonstrated using the following relation that is:

Z-Score = 1.2A + 1.4B + 3.3C + 0.6D + 1.0E

In the above formula, A represents the ratio of working capital to the total assets of the company. B manifests the ratio of the retained earning to the total assets controlled by the organization. C represents the ratio of the quantum of earnings before the interest and tax to the total assets of the concern. D is the ratio in relation to the market value of the equity to the total liabilities of the company and last but certainly not least E is the representation of the ratio of the sales of the organization to the total assets.

You can observe that each of the important metrics in relation to the financial health of the company whether it is profitability, leverage, activity find its place in the Altman Z-score. This way Altman Z-score is a comprehensive measure of the soundness of the financial health o f the company.

Altman Z-score and Stakeholders

The low score on the scale of Altman Z-score is representative of the high probability of the company going bankrupt. The score can be effectively used in relation to the evaluation of the companies notwithstanding to the fact that they are public, private, US-based or non-US based and likewise manufacturing or non-manufacturing concern. Stakeholders can easily assess from the Altman Z-Score low score that there needs to be a restructuring of the financial management policies. Likewise, a good Altman Z-score of 2.6 or more can be satisfactory for the shareholders of the organization that their financial management operations are sound and the company has the ability to withstand the going concern assumption in the long term.

Altman Z-score Zones

In order to facilitate the stakeholders in relation to the making of the key economic decisions, there are defined Altman Z-scores’ zones that can help the stakeholders to quickly judge the condition of the financial health of the company.

Distress Zone It can also be referred to the red zone and the companies that score 1.1 are used to be placed in this zone.

Grey Zone It is a middle zone and represents the significant risk in relation to going bankrupt. The companies that score in the slab of 1.1 to 2.6 usually placed in this zone.

Safe Zone The zone every company wishes for and it asks for hard work on the part of the company in terms of financial operations. The score is for the companies that score 2.6 or more.

Costing Systems

Let's focus on the literal meaning of the costing system. The very term is suggesting that there is a specific system in relation to the costing. The subsequent question will be like costing of what? Costing systems are particularly used by the manufacturing concerns. They are the economic units that are engaged in the economic activity of the production. They produce and they cost what they produce. Therefore, costing systems are such systems that are used by the production organizations in relation to the costing of their products or alternatively the services.

Types of Costing Systems

With the passage of time, there has been an evolution in relation to many costing systems. Each new costing system tries to redress the limitations, demerits of the previous system. The principle and traditional costing systems were processed costing and job order costing. However, now the list has expanded and it includes many other costing systems such as standard costing, target costing, ABC costing.

Objectives of the Costing Systems

Primarily, they are programs that let the organizations identify what their output is costing per unit and thus they can add to it their margin and then quote the price to the prospective customers.

Secondly, they serve as the controls as well. They assist the organization in controlling the costs that would be eventually incurred and in this way the eventual prices of the products and services stay within the reach of the customer and this assist the organization in the achievement of its central goal of profitability.

Finally, using the costing systems, the organizations can assess the estimated margins and the profits that could be earned and this helps in budgeting other cash flows.

Example of the Job Order Costing System

One of my friends is engaged in the Business of constructing apartments. Now, each apartment may be customized at the customer's request. In such circumstances, it is easy and logical to cost that individual apartment. The job order costing system is such costing system that assists in the costing of the individual products such as apartments in the aforementioned example.

Example of the Process Costing System

Process costing system is applicable when your organization is principally engaged in the production of those goods that are similar in features. Widgets could be an example for our understanding. All the widgets are usually same in terms of weight, color, size and the organization can engage in the mass production of the same. All the costs in relation to the inputs are assessed and then charged to each of the units eventually produced depending upon the total output. This is the essence of the process costing. One of my friend who is an auditor has audited an organization that used to manufacture Air conditions. Air conditions of particular technology and tonnage are produced in many numbers which are eventually costed using process costing system.

Conclusion

Costing systems are such systems that are used by the production organizations in relation to the costing of their products or alternatively the services. They are programs that let the organizations identify what their output is costing per unit and thus they can add to it their margin and then quote the price to the prospective customers. They serve as the controls as well.

Nokia Android Phones 2017

Nokia Will Bring Two Android Phones in 2017

Nokia which has been long the market leader in the mobile phones find the sharp downturn while apple has been up on the Market. However, 2017 mark the return of the ex-Tech leader. Nokia plans to bring two android phones in 2017 with exquisite features that will appeal customs in terms of the affordable price as well in comparison to the other android phones. Nokia 6 that seems to have captured the market by storm is just an off the mark. Nokia 6 sales have reached the record sales in just about a minute.  Nokia 6 specs make it very good and quite unique set the specs goes like this that the Display screen is 5.50 inches big, however, the processor is whooping octa core that is 1.1 Giga Hz Octa core processor. Yes, it is mind blowing. The resolution of the front camera is 8 Megapixels, now you don’t need to carry big DSLR cameras all the way.

Ratio Analysis

Classification of financial ratios on the basis of functionality:

In relation to the premise of capacity testing or assessment, many financial ratios are used to be calculated. The primitive ratios, the proportions are categorized under the following heads that is  the liquidity ratios followed by the profitability ratios and the activity efficiency ratios and lastly but certainly not the least are the Solvency ratios.

Financial Ratios and the Stakeholders

The aforementioned categories of the financial relations (ratios) target different stakeholders and their information needs. There may be several stakes and therefore there is variety in relation to the information needed as far as stakes are concerned. For instance, liquidity ratios usually demonstrate the stake that is in relation to the current accounting period. Liquidity ratios demonstrate the stake of such liabilities that are for surely going to be due in the coming 12 months from the reporting date.

The providers of the debt for the very organization in generally and the long-term debt are particularly concerned about the solvency state of the company. Quite similar to the liquidity, the solvency is the assessment to pay what would be due in the long-term that is in the coming two years and beyond that term.

The preceding instances highlight and emphasize the importance of the financial ratios and how they are used by different stakeholders in relation to the assessment of their respective stakes and concerns.

Financial Ratios and the Auditors

Auditors are very much concerned with the financial ratios. Financial ratios assist the auditors in the finding of the soundness of the company that is whether the operations are conducted with effectivity and efficiency. Auditors are responsible for sharing the opinion about the execution of the operations of the entity and this is why efficiency ratios concern the auditors much.

Financial Ratios Computation

It is not necessary that you keep on rotting every formula of the specific financial ratio. What is indeed important that you understand the concept and the formula will follow for surely. For instance, when I know that current ratio is a liquidity ratio and it is usually employed to have knowledge if the specific company has to dispose of its short-term liabilities, it would be automatically clicked to your mind that this ratio will involve current assets and liabilities. The word ratio suggests that it would be a fraction and would have numerator and denominator.

This is why financial ratios understanding is very important. The questions related to the financial ratios in the examination hall requires little interpretation skills as well which is only possible when you have the full understanding of the specific ratio.

When financial ratios are computed over the years for instance in relation to two consecutive years, required interpretation increases a little. In this case, you would not only set out what this ratio mean but would also set out whether it increases or decreased over the time and what financial implications do this increase or decrease in term of that specific computed ratio hold in relation to the company.

Revenue Recognition Principle

Introduction

It is one of the important accounting principles and is the basis of many accounting requirements set out in either of generally accepted accounting principles (GAAP) or alternatively International financial reporting standards (IFRS). The primitive requirement of the principle is that following the accrual concept in relation to the accounting of the transactions, Revenue should only qualify for recognition when there is substantial evidence with regard to the completion of the revenue cycle. Stated differently, record the revenue transaction, when there is reliable evidence that it is earned.

Example of the Revenue Recognition Principle

ABC is an organization that principally deals in relation to the snow plowing services. The company has completed the services in relation to the plowing of XYZ organization’s parking space. The standard charges for the service are $100. The revenue transaction can be recorded right after the rendering of the services of the plowing, though there is no expectation with regard to the payment from the intended customer for several further weeks. This is how revenue recognition principle functions under the accrual basis of accounting.

Revenue Recognition Principle and advance payment

Suppose that the XYZ organization pays $1,000 in advance in relation to the acquisition of the snow plowing services for the subsequent six months. In such case, there will be a recording of the incremental revenue in each month for which services are rendered. In this case, each month $166 amount of the revenue is recognized and an adjusting entry is passed to bring down the balance of the advance payment. In this way, revenue is accurately reflected for the entire period of the agreement that is six months in the subject case. The advance payment that is $1000 is not revenue for the ABC organization but a liability which will be settled down by the rendering of the services. This is why it is classified as current liability section in the Balance sheet unless it is completely set off by the corresponding adjusting entries to the revenue account.

Revenue Recognition Principle and Cash basis of Accounting

Revenue recognition principle is quite simple when the organization used the cash basis of accounting for the preparation of its financial statements. Cash basis of accounting requires that the organization should recognize revenue right at the point of receiving the payment irrespective of the fact that it relates to the service rendered in the prior periods or will be rendered in the future period(s).

Revenue Recognition Principle and IFRS

Revenue recognition is an important aspect of the financial reporting process of the organization. This is why it is subjected to excessive controls, so that risk of fraudulent financial reporting in revenue cycle is minimized. Over and above, Auditors also deem it as a risky area of the financial statements which may consist of misstatements. This is why Auditors apply extensive procedures on the Revenue to verify it. IFRS has also strongly emphasized the fair recording of the revenue and for this purpose issued a dedicated revenue standard to achieve the objective of fairness of revenue reporting.

Conclusion

The primitive requirement of the principle is that following the accrual concept in relation to the accounting of the transactions, Revenue should only qualify for recognition when there is substantial evidence with regard to the completion of the revenue cycle. Revenue recognition is an important aspect of the financial reporting process of the organization. This is why it is subjected to excessive controls, so that risk of fraudulent financial reporting in revenue cycle is minimized.

Reliability Principle

Introduction

It is one of the important accounting principles and is the basis of many accounting requirements set out in either of generally accepted accounting principles or alternatively International financial reporting standards. Lets brief it a little using the real time examples. Suppose that you have purchased certain cosmetics from a departmental store and subsequent to your purchases you are handed in a cash memo detailing your purchases quantity, rate, the value of each item and the total bill. This cash memo serves as the source document for the accountants and it is sufficient and objective evidence underlying the specific record of the transaction.

Reliability principle opines that only those transactions should become part of your accounting information system that are supported by an objective commercial document such as cash memo in the above case.

Examples of Objective Documents in relation to Reliability Receipts

Following documents serve as objective and appropriate documents and support the transactions recorded on the basis of them:

1.      Purchase Receipts It is issued subsequent to any specific purchase that relates to either goods or services. The seller issues the same to the buyer.

2.      Checks or canceled checks They serve as evidence in relation to journal entries which involve banks. In the case of receipt or issuance of a check, the bank is debited or credited respectively. Canceled checks serve as evidence of reversal entries involving bank accounts.

3.      Bank Statements Bank statement serve as evidence and support the closing balance of the specific bank account that is reported under the current asset section of the Balance Sheet.

4.      Promissory Notes Promissory notes serve as appropriate evidence in relation to any specific account payable balance at the reporting date.

Auditors and Reliability Principle

Auditors seek audit evidence before they can opine about the fairness of the financial reporting practices of the specific organization. Source documents discussed as above serve as appropriate audit evidence for them which assists them concluding as a whole about the fairness of the financial reporting system of the organization.

Documents that are more Reliable

Usually, the commercial documents that are internally generated are not considered as good evidence of the transactions. The commercial documents that are issued by the third parties serve as good and objective evidence of the accounting transactions used to be recorded. A perfect example of the third party evidence is Bank statement. Bank statement serves as evidence and supports the closing balance of the specific bank account that is reported under the current asset section of the Balance Sheet. It is acceptable by the auditor as evidence in relation to specific bank account balance which is reported by the management in the notes to the financial statements.

IFRS and the principle of Reliability

IFRS is a globally implemented financial reporting framework. IFRS requires that only those transaction should become part of the financial statements which can be measured reliably to sufficient extent.  This is source documents or the third party evidence which IFRS is talking about and hence assists in the reliable measurement of the transactions.

Conclusion

Reliability principle opines that only those transactions should become part of your accounting information system that are supported by an objective commercial document. Auditors seek audit evidence before they can opine about the fairness of the financial reporting practices of the specific organization. Reliability principle significantly assists them in the audit of the financial statements of the organization and this way these audited financial statements serve as a benchmark for the decision making of the stakeholders.

Materiality Concept

Introduction

It is one of the important accounting principles and is the basis of many accounting requirements set out in either of generally accepted accounting principles or alternatively International financial reporting standards. The primitive feature in relation to the materiality concept is that there should be no omission or alternatively misstatement of any piece of information which can potentially impact the decision making of the stakeholders of the organization.

Material information can be financial information or alternatively non-financial information. You would be thinking why non-financial information is material. The rationale is that the nature of the information is such that it can potentially impact the decision making of the stakeholders. Let’s observe some of the instances where information is material on the basis of either nature or alternatively the financial impact.

Examples of Material Information

The presence of the Related parties of the organization. Notwithstanding to the fact, that there is no transaction with related parties, it is important that such relationships are reported in the notes to the financial statements as per the material concept. This disclosure is required because the information is material due to its nature. Lawsuits in which the organization is a party is another example of material information that needs to be reported in the notes to the financial statements due to its nature. The company total of the penalties owing to the non-compliance of the laws amounts to 25% of the net income. This is the material amount in terms of size and needs to be reported in the notes to the financial statements because of its financial impact.

Concept of Materiality and Auditors

Auditors are quite serious about the concept of materiality. In fact, they have consented upon a performance materiality level that depends upon their judgment and it assists in the execution of the audit of the organization. Any financial information that is beyond the size of the financial information is subjected to the audit procedures and verified if it is really for the purpose of the business of the organization. This yields reasonable assurance to the auditors and they can opine that the organization is fair in its financial reporting practices. The amounts which are less than the materiality threshold are not subjected to detailed audit procedures. In this way, auditors have reasonable assurance instead of the absolute assurance. The absolute assurance is possible only when the auditors check each and every transaction of the organization which obviously not possible due to the time and cost restraints.

It is difficult to quantify the materiality and at times it has to lead the organization into recording the tiny transactions which significantly increased the costs of the accounting. Materiality principle depends upon the judgment of the management and it is up to management to decide what information should be made part of the financial statements.

Conclusion

In the nutshell, The primitive feature in relation to the materiality concept is that there should be no omission or alternatively misstatement of any piece of information which can potentially impact the decision making of the stakeholders of the organization. Material information can be financial information or alternatively non-financial information. The rationale is that the nature of the information is such that it can potentially impact the decision making of the stakeholders.