89) What knowledge should financial accountant have?
A certified financial accountant should have knowledge about:
94) What is the difference between depreciation and amortization?
The difference between depreciation and amortization is:
|Depreciate means to lose the value of an asset due to its usage, wear, and tear, outdated, etc.||Amortize means to write off or pay the debt over a period of time. Amortization can be for loans, or it can be for Intangible assets.|
|The depreciation cost is calculated in terms of tangible assets like furniture, plant & machinery, building, etc.||Amortization cost is calculated in terms of intangible assets like goodwill, trademark, loans, patents, etc.|
|The purpose of calculating depreciation costs recovery||The purpose of calculating amortization is also for cost recovery|
|The easiest or better way to calculate depreciation is to know the loss of value of an asset over its life.||Amortization calculates the amount spent after the intangible assets throughout the life for that asset.|
|For example, a car worth $30,000 has estimated the lifetime of 10 years after that, it will have no value in the market. The cost or loss in value throughout these 10 years is known as depreciation||For example, Pharmaceutical Company spent $20 million dollars on a drug patent with a useful life of 20 years. The amortization value for that company will be $1 million each year|
|Various method for depreciation includes straight-line depreciation, declining balance method, group depreciation method, unit of time/production depreciation method, etc.||Various method for amortization is negative amortization, zoning amortization, business amortization, etc.|
What is Capital, type of account & where is it shown in the financial statements?
Also called net worth or owner’s equity, capital is the money brought in by the owner of the business as an investment to start the operations. Capital is a type of Personal Account which belongs to an individual or a firm (owner).
Capital is shown on the liability side of a balance sheet.
Here is our detailed article on Capital along with its Journal Entry here.
Related Topic – Is Capital an Asset or Liability?
Keep in mind that fictitious assets are not assets; they are fake or deceptive. They are actually expenses and losses that could not be written off during the accounting period. They are written off in multiple future accounting periods.
Examples – Preliminary expenses, promotional expenses of a business, discount allowed on the issue of shares, the loss incurred on the issue of debentures, etc.
Fictitious assets are shown in the balance sheet on the asset side.
Related Topic – List of Fixed Assets & Current Assets
40) Differentiate between consignor and consignee
Consigner is the owner of the goods, or you can say he is the person who delivers the goods to the consignee. The consignee is the person who receives the goods.
Balancing means to equate both sides of the account, i.e., the debit and credit sides of an account must be equal/balanced.
1 What is Depreciation, different types of depreciation & its journal entry?
The reduction in the value of a tangible fixed asset due to normal usage, wear and tear, new technology or unfavourable market conditions is called Depreciation.
Types of Depreciation
Read more on Depreciation with examples along with types of depreciation
Related Topic – Provision for Depreciation Shown in Trial Balance
Contingent liabilities are those liabilities that may or may not be incurred by a business depending on the outcome of a future event. The existence of this kind of liability is completely dependent on the occurrence of a probable event in future.
Example – Let’s suppose that Apple files a case of a patent violation on Samsung and Samsung not only realizes that it may have to pay for violations but also estimates how much in total. In this case, Samsung will record the estimated amount in its books of accounts as a Contingent Liability.