1/. What do you understand by the term Depreciation, Depletion and Amortization?
2/. Give two examples of assets that each of the above terms is applicable
3/. Define the term Trial Balance and give two advantages and disadvantages of it.
Depreciation: Is a reduction in the value of tangible fixed assets. It also refers to an expense recorded to allocate a tangible asset’s cost over its life. Because it is a non-cash expense, it increases free cash flow while decreasing reported earnings.
Depletion: Is the gradual reduction of natural resources. Unlike depreciation which describes the deduction of expenses due to aging of equipment and property, depletion is the actual physical ...view middle of the document...
When a company is being purchased more than its realizable value, the excess amount is called goodwill. The goodwill amount is being divided by its useful life and it is called amortization.
3/.Trial Balance; A trial balance is simply a list of ledger balances at the end of a particular period. It also refers to the statement that contains all the balances of individual double entry ledger both credit and debit.
The advantages are:
i/. It facilitates the preparation of trading, profit and loss accounts and the balance sheet.
ii/. It shows a summary of ledger balances at the end of the period.
The disadvantages are:
i/. Error of Compensation that is when multiple unrelated errors are committed, but together cancels each other out.
ii/. Error of original entry that is when both sides is incorrect example, if a purchase invoice for £21.00 is enter as £12.00.
METHODIST UNIVERSITY COLLEGE
NAME: ABIGAIL TWUMASI ADDAI
INDEX NUMBER: 1011004319
COURSE: FINANCIAL ACCOUNTING
LECTURER: MR. MICHEAL SEFA
LEVEL: 200 EVENING STUDENT
Presby Church of Ghana
P.O. Box MP 1441
The Managing Director
Danimar Engineering Limited 24th June, 2010
P.O. Box CO 322
APPLICATION FOR A LOAN
I want to pursue a Distance Course in Business Administration at the Methodist University to upgrade myself.
I would therefore like to apply for a loan of One Thousand, Five Hundred Ghana Cedis (GH¢ 1,500.00) to enable me pay part of my Tuition Fee.