Saturday, July 27, 2013

What Is Fixed Installment Method Of Depreciation?

Meaning Of Depreciation
The goods and services provides to customers are obtained through the utilization of fixed assets during the operation process for a number of continuous accounting periods.As Fixed assets are used to generate periodic revenue,hence an appropriate amount of cost related to the fixed  assets should be charged as an expense against the revenue generated by the use of fixed assets. The potion of the cost of fixed assets charged to profit &loss account during a particular accounting period is termed as depreciation.

The term depreciation denotes decrease in the value of asset but in terms of accounting it is referred as decrease in book value of assets. Depreciation is a  permanent and continuous decrease in the book value of fixed assets due to use,effluxion of time,obsolescence etc.its is treated as non -cash expenditure.

Fixed Installment Method
Under this method deprecation can be calculated as follows:
1-when the assets has no residual value:
Each year depreciation = original cost of asset / number of years of estimated life of the asset.
2-when the assets has residual value:
Each Year Depreciation=(original cost of the asset-its estimated residual value)/number of years of estimated life of the asset.

Depreciation calculated according to the fixed installment method  is charged every year and at the end of the life of the asset,the amount of asset become zero.under this method every year amount of depreciation remains the same.

Merits:
1-it is very simple to calculate depreciation.
2-it is suitable in case of those assets whose service remain uniform in every year.,e.g.,furniture and fixtures.

Demerits:
1-value of asset goes on decreasing but the amount of depreciation remains the same every year.

It is known by following names also:
1- straight line method 2-original cost method
3-equal investment method 4-simple method of depreciation.

If you want to calculate asset with residual value then you can go through this link:
http://www.formuladirectory.com/user/formula/348
If you want to calculate asset without residual value then you can go through this link:
http://www.formuladirectory.com/user/formula/349


Friday, July 26, 2013

What is Present Value and Future Value of annuity


Introduction                                                                                      
In finance theory,an annuity is a terminating stream of fixed payments. The valuation of such stream  of payments entails concepts such as the time value of money,interest rate and future value .Basically Annuity are regular deposits to a savings account, monthly home mortgage payments and monthly insurance payments. Annuities are classified by the frequency of payment dates. The payments or deposits may be made weekly, monthly, quarterly, yearly, or at any other interval of time.

Financial Manger always confronted with opportunities to earn positive rate of returns on their investment.For this the timing of cash outflow and cash inflow has important economic value,which financial mangers explicitly recognize as the time value of money.Time value is based on the concept that dollar today is worth more than the dollar that will be received at some future date.Because a dollar can be invested and earn a days of worth of interest. Our study of time value in finance,considering the two views of time value,present value and future value of money.The time value of money is the most important concept in finance ,which normally use to increase the better rate of return on the basis of present value and future value concepts.

Present Value And Future Value Of Money

Present value is also known as present discounted rate,is  a future amount of money that has been discounted to reflect its current value,as if it existed today.The preset value is always less than or equal to the future value because money has interest earning potential,a characteristic  referred to as a time value of money.
Present value calculation similarly future value calculation are used to value loans,annuity,mortgage,sinking fund ,perpetuity and more. 

Techniques Of Present Value And Future Value

Present Value Technique measures cash flow at the start of the projects life.(zero Period).Future Value Technique measure cash flow at the end of the projects life.



Saturday, July 6, 2013

Tips on using constants in Formulas

If you are creating a formula that needs to use a constant (this is what we call them here, its not a official name), then you need to know how to use them accurately in order for them to work.

The Basics

All the constants are basically just symbols which represent a particular function. The function is basically an operation which is performed on a specific part of the formula. Here are a few points to remember : 

  1. The specific part on which the constant acts or operates is denoted by simple brackets. That is, this part starts which a ( and ends with a )
  2. The operation can either just place a number or can act on a set of numbers or variables. For example. If you use the constant for pi in a formula, then it will simply be replaced by its value and will not have any effect on rest of the formula. Thus, 2*Π*r becomes 2*3.1416*r
  3. The operation can also act upon a set of numbers or/and variables. For instance,  the power constant which is used in this form : ρ(r,4) operates on r and 4, calculating it as r to the power of 4. Another example of the power function can be something like   ρ((r+1),(n-1)). In such a case, as both the base and power are not a single number, thus the brackets make the function work.

Monday, June 24, 2013

Tips for Creating your Formula

Although formula creation is a simple process, typing your formula is the correct and the most efficient way is essential to make it work.

Here are a few tips :


  1. When you use variables, try and make them of single character only. This ensures that all the variables are unique. For example, if you are looking to make the formula for speed, which is distance/time, you should write is as d/t
  2. When you define a formula, it contains a number of variables. These variables are the values which the user is required to provide at the time of solving the formula. So, it is essential to let the user know which variable stands for which value. To ensure maximum user friendliness of your formula, enter a useful description. 
  3. Remember that the variables listed in the variables field should be absolutely the same as the variables used in the formula. For example, defining a formula as 'length*breadth' and then defining variables as 'l,b', will not work. Defining the formula as 'l*b' and defining the variables as 'l,b' or even 'b,l' will work.
  4. A useful description must tell the user which variable stands for which value. For example, consider this description for the formula of speed, "Formula to Calculate speed. Here, d = distance and t = time".
  5. Typing formulas on your computer is very different from writing them paper. On the computer, you will find that typing the formula is a bit more complicated, as it has to be understood by a computer and not a human. Using brackets and operators are important.
  6. Remember that if you have to multiply two variables, d and t, then dt will not work. You have to type it as d*t. Even dXt will not work. You have to use the proper operator as the computer understands it.
  7. You will find that when you have entered the formula and are checking it, it does not look very organized or legible as the formulas that are already there. This is because to look legible, the formula has to be parsed as MathML, which is not possible until the formula has been approved by a moderator. Once the formula has been approved, MathML parsing is enabled for the formula and then your formula starts to look good.

Saturday, June 22, 2013

I verified my formula, then why does it still not appear on the website?

The formula that you have newly created will only appear on the website when a moderator has verified it on his end.

Basically, at the time when you verify the formula, we intimate the moderator about this and then he/she goes ahead and checks the formula and allows it to go live on the website.  

What happens when I save a formula I just created and checked?

After you have correctly filled out the form for formula creation and have then checked that the formula is working, then the application will ask you whether you want to save it. Once you opt in to saving it, the website will send a verification link to your email id. You need to click on that link. Once you click, you will be taken to the verification page where the formula will be automatically verified.  Remember that I have put a dual verification in place. So after you have verified the formula, a moderator also has to verify it. Only after it has been verified by both you and the moderator, will this formula appear on the website.

What are constants and how to use them?

Constants is the name that we have given to the  symbols or functions that we use in maths. Symbols like Pi, Squareroot, Power etc which are not just symbols but have a purpose or a value are listed here. 

When you need to use any one these, hover your mouse on the button of the constant and a tip for using it will appear. When you click on the button, the symbol is appended to the end of the formula, as it is currently typed. Don't try and cut/paste this symbol to change its position, as this probably might not(or probably will) work.