Jim Sandrolini is an accountant for a local manufacturing company. Jim's good friend, Dan Carruthers, has been operating a retail spporting goods store for about a year. The store has been moderately successful, and Dan needs a bank loan to help finance the next stage of his store's growth. He has asked Jim to prepare financial statements that the banker will use to help decide whether to grant the loan. Dan has proposed that the fee he will pay for Jim's accounting work should be contingent upon his receiving the loan. Required: What factors should Jim consider when making his decision about whether to prepare the financial statements for Dan's store?
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Jim Sandrolini is an accountant for a local manufacturing company. Jim's good friend, Dan Carruthers, has been operating a retail spporting goods store for about a year. The store has been moderately successful, and Dan needs a bank loan to help finance the next stage of his store's growth. He has asked Jim to prepare financial statements that the banker will use to help decide whether to grant the loan. Dan has proposed that the fee he will pay for Jim's accounting work should be contingent upon his receiving the loan. Required:
What factors should Jim consider when making his decision about whether to prepare the financial statements for Dan's store?
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