Author: Hege Kvam

The intent is to create a reserve against those contractor invoices that are probably not going to be paid, even though the bookkeeper cannot yet specifically identify which invoices will not be paid. Like the other GAAPs, the principle of prudence is there to provide accountants with a solid base and philosophy on which to… Continue reading What is Prudence Concept in Accounting?

The prudence principle in accounting is often described using the phrase “Do not anticipate profits, but provide for all possible losses.” There are many liabilities that are not certain either in terms of amount or in terms of date, but they have a high possibility of occurrence. In such cases, the liability is recorded, and… Continue reading Prudence Concept In Accounting Explanation & Examples

Save more by mixing and matching the bookkeeping, tax, and consultation services you need. The beginning of period (BoP) book value of the PP&E for Year 1 is linked to our purchase cost cell, i.e. Per guidance from management, the PP&E will have a useful life of 5 years and a salvage value of $4… Continue reading Declining Balance Depreciation Calculation Example

We should have an Ending Net Book Value equal to the Salvage Value of $2,000. With other assets, we may find we would be taking more depreciation than we should. In the last year, ignore the formula and take the amount of depreciation needed to have an ending Net Book Value equal to the Salvage… Continue reading Double Declining Balance Method: Formula & Free Template