Various Types of Standard Costing
Standard costing methods classify standards based on their accuracy and intended application. These include ideal, basic, normal, current, and expected standards, each serving a specific role in cost control and performance evaluation. (i) Ideal Standards Ideal standards represent the level of performance achievable under the most favorable conditions. These conditions include optimal material and labor…
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Understanding Form of Balance Sheet
A balance sheet should always balance. Assets must always equal liabilities plus owners’ equity. Liabilities must always equal assets minus owners’ equity. The balance sheet of an entity may be presented in a few different formats, including: Report form This is the most common format, with assets listed first, then liabilities, and finally equity. The…
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Understanding Loan Calculators and Amortization Schedules: A Guide for Borrowers
Loan Calculators and Amortization Schedules A loan calculator is a financial tool used to compute the Equated Monthly Instalment (EMI) payable on a loan, based on key parameters such as the loan amount, interest rate, and repayment tenure. In parallel, a loan amortization schedule provides a detailed breakdown of each loan payment over time, delineating…
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Understanding the Time Value of Money: Concepts of Interest and Annuities
Time Value of Money, Interest, and Annuities The Time Value of Money (TVM) is a foundational concept in finance, asserting that a sum of money available today holds more value than the same amount in the future. This principle is based on the potential earning capacity of money through investment and the impact of inflation…
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Illustrations of how to calculate Present Value- PV and Future Value-FV of annuity?
(This post elucidates on what is annuity, what is ordinary annuity, how to calculate present and future value of annuity along with formulas for calculation of annuity values) An annuity can be defined as a sequence of equal payments made at equal intervals of time. Equated Monthly Installments (EMIs) of loan repayments, monthly remittance of…
Replacement of a Fixed Asset and Creation of Sinking Fund
All industries make long-term capital investments for growth. These capital assets may be plant and machinery, or intangible assets like IT, or infrastructure assets. Irrespective of their nature, every asset has a lifecycle that demands careful attention whether to repair or replace certain assets. To decide between repairing and replacing an asset, the management of…
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