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Depreciation allocates the cost of an asset over its expected lifespan according to the matching principle. For example, if a machine is purchased for $100,000, has a lifespan of 10 years, and produces the same amount of goods each year, then $10,000 of the cost (i.e., $100,000 divided by 10 years) is allocated to each year.
The cost basis of an asset is important to you for two primary reasons – tax planning and investment planning. These two reasons are related because only with the proper investment planning can ...
Methods to calculate cost basis. The cost basis for stocks and mutual funds is generally the price you paid when you purchased the asset, plus any other trading costs. However, there are several ...
Based on the matching principle of accrual accounting, revenues and associated costs are recognized in the same accounting period. However the actual cash may be received or paid at a different time. However the actual cash may be received or paid at a different time.
In accounting, the revenue recognition principle states that revenues are earned and recognized when they are realized or realizable, no matter when cash is received. It is a cornerstone of accrual accounting together with the matching principle. Together, they determine the accounting period in which revenues and expenses are recognized. [1]
Buy low and sell high is one of the most fundamental rules of stock investing. Knowing the cost basis of the stocks you purchase can help you estimate your potential profit should you decide to sell.
In accounting, a basis of accounting is a method used to define, recognise, and report financial transactions. [1] The two primary bases of accounting are the cash basis of accounting, or cash accounting, method and the accrual accounting method. A third method, the modified cash basis, combines elements of both accrual and cash accounting.
In subsequent periods, the historical cost along with taxation-driven depreciation methods does not help managers determine their current operational cost factors. b) Matching principle (Kieso, Weygandt and Warfield)p40 – this principle mandates that the costs (expenses) must follow revenues or adopt the best "rational and systematic ...