1. What is depreciation? Depreciation expense Accumulated depreciation Depreciation methods in accounting 2. Units of production depreciation method 3. Example: Units of production depreciation method Step 1: Calculate the depreciation per unit Step 2: Apply actual...
Fixed Asset Articles
Residual Value and Salvage Value Explained
In this blog, we will explore salvage value and residual value, how they differ, and an example of how this comes into play when considering tangible assets. What is salvage and residual value? Salvage value is the estimated worth of an asset at the end of that...
Sum-of-the-Years’ Digits Depreciation Explained with an Example
1. What is depreciation? Depreciation expense Accumulated depreciation 2. Depreciation methods in accounting Sum-of-the-years’ digits depreciation Example: Sum-of-the-years’ digits depreciation Sum-of-the-years’ digits depreciation method: When does it make sense? 3....
Asset Capitalization Accounting Explained with Examples and Journal Entries
1. What is capitalization in accounting? How assets are capitalized 2. Example 1: Fixed asset capitalization Acquisition and capitalization Depreciation: Accounting for value decline Journal entries 3. Example 2: Finance lease right-of-use asset capitalization...
Lease Purchase Options and More Intersections of Fixed Assets and Lease Accounting Explained with a Full Example
1. Capitalization of leases and fixed assets ASC 840 – Capital leases and fixed assets on the balance sheet ASC 842 – Operating leases now capitalized Accounting for finance leases vs operating leases 2. Similarities in accounting policies Capitalization thresholds –...
Materiality, Immateriality, and Material Misstatements in Accounting
1. What is materiality in accounting? 2. What does it mean if something is immaterial in accounting? 3. What is a material misstatement? 4. How does materiality relate to leases, subscriptions, and fixed assets? 5. Frequently asked questions 6. Related articlesWhat is...
Operating Expenses Explained: Types, Examples, Accounting, & More
1. What are operating expenses? 2. Operating expenses vs. capital expenditures 3. Types of operating expenses Cost of goods sold (COGS) Selling, general, and administrative expenses (SG&A) Depreciation and amortization Research and development (R&D) Notable...
CapEx vs. OpEx: Capital and Operating Expenses Explained
1. CapEx (Capital Expenditures) How is CapEx reported? 2. OpEx (Operating Expenses) How is OpEx reported? 3. Is software CapEx or OpEx? 4. CapEx vs OpEx: Which is better? 5. Summary 6. Frequently asked questions 7. Related articlesEvery company has a variety of costs,...
Corporate Budgeting for Fixed Assets, Leases, and Software
Corporate budgeting is the process of creating a detailed financial plan for an organization. It typically includes forecasting revenues and expenses, to project profits, as well as setting targets and priorities for various departments or programs. It involves...
Fixed Asset Accounting Explained with Examples, Journal Entries, and More
1. What are fixed assets? Fixed asset examples Current assets vs. long term assets Tangible vs. intangible assets Right-of-use assets vs. fixed assets Operating vs. non-operating assets Capitalization policy and materiality Total fixed assets vs. net fixed assets 2....
Depreciation Expense & the Straight-Line Depreciation Method Explained with a Fixed Asset Example & Journal Entries
1. What is depreciation? Depreciation expense Accumulated depreciation 2. Depreciation methods in accounting Straight-line method of depreciation Declining balance method of depreciation Sum-of-the-years’-digits depreciation method Units of production depreciation...
What Are Fixed Assets? Fixed Assets in Accounting Explained
1. What are fixed assets? 2. What are the three types of fixed assets? 3. What are some examples of fixed assets? 4. How do you account for fixed assets? 5. How do you calculate fixed assets? 6. What are the advantages of fixed assets? 7. What are the disadvantages of...
Why Fixed Asset Software Isn’t Suitable for the New Lease Accounting Standards
Prior to the introduction of the new lease accounting standard, ASC 842, many organizations grouped their leased assets along with their fixed assets. The organization likely placed assets financed with a capital lease on the balance sheet as “capital assets” and...
Improving Capital Budgeting Decisions Using Finance and Accounting Tools
1. Capital budgeting in corporate finance 2. Capital budgeting methods 3. Finance and accounting tools ERP Fixed asset systems Lease accounting systems Lease administration systems Lease vs. buy calculator Capital budgeting in corporate finance Capital budgeting is...