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Depreciation Definition And Meaning What is Depreciation? Depreciation is the Systematic allocation of the cost of the Fixed Assets / Non Current Assets over its useful life. With the passage of time, the market value of Fixed Assets / Non Current Assets may increase or decrease, but for proper allocation of the assets, deprecation is calculated by applying different Depreciation Methods in order to estimate the usefulness of the assets within the estimated useful life. Note: The term "Depreciatio n" is used when allocate cost of an Tangible  No n Current Asset  while the word " Amortization " is used when we allocate cost of an Intangible  No n Current Asset . . Explanation 1. It is to be noted that valuation of assets is different than allocation of the cost of the assets in the sense that valuation is the process of finding the market value of the asset for selling in the marketplace while allocation of the cost of the

When the goods purchased by the business to its suppliers by se nding any Cash Payment, then Such Purchases are called Cash Purchases. For Example, if Mr. A Purchased Goods Worth Rs. 50000 From Mr. B (Supplier) and makes the payment on time, then this Business Transaction is called Cash Purchases and Mr. A records this purchases account in his book of accounts as an Cash Expense. You Can Also Read Out “ How To Calculate Cash Sales ” As, we know the Total Purchases include Cash And Credit Purchases, so we can write in the form of equation as shown below: Total Purchases = Cash Purchases + Credit Purchases Cash Purchases = Total Purchases - Credit Purchases The information related to Cash Purchases is obtained from Statement of Cash Flows Under Cash From Operating Activities Section and it is added back to Net Income / Net Profit Obtained from Income Statement or Profit & Loss Account.

Goods Sold For Cash are called Cash Sales. For Example, if Mr. A Sold Goods Worth Rs. 30000 To Mr. B For Cash, then this is the Business Transaction for Cash Sales. Cash Sales is calculated by deducting Credit Sales From Total Sales. If Total Sales is given, then we need to calculate Credit Sales and finally we can find out Cash Sales easily. You may also find this article helpful, “ How To Calculate Credit Sales ” Following Equation is used To Find out Cash Sales: Total Sales = Cash Sales + Credit Sales Cash Sales = Total Sales - Credit Sales Example, if the Credit Sales = Rs. 500000, And Total Sales = Rs. 700000, then Cash Sales can be found as shown below: Cash Sales = 700000 - 500000 = Rs. 200000 From the above equation, the businesses can also calculate the value of Credit Sales or Total Sales.

When The Business bought goods, then we can say that the business made purchases for the Current Accounting Cycle. Purchases Can be Cash Purchases or Credit Purchases . When Goods Purchased From Suppliers ( Accounts Payable ) of the business, then Credit Purchases are made and when goods purchased by the business for Cash, then Cash Purchases are created. Here we are concerned with How To Find the value of  Net Credit Purchases? Read Out Also, “ How To Calculate Credit Sales ” Credit Purchases Calculation A nd Formula: Credit Purchases are calculated by Preparing Total Accounts Payable / Creditors T Account . It is to  be noted that  Net Credit Purchases Formula  may also be used to calculate Net Credit Purchases. Opening Accounts Payable / Creditors is the Ending Balance of Previous Accounting Period. However, there is no Opening Accounts Payable for the business, if the business just starts in the first Accounting Period. Closing Accounts

We already know that Goods sold are called Sales . Also, we learned that Sales may be made o n  Cash Basis or Credit Basis. In case of Accounts Receivable or Debtor , Sales is called Credit Sales as goods are sold on Credit Basis within the specified Accounting Cycle. Now the question How To Find Out Credit Sales or  Net Credit Sales? You May Also Study, " How To Calculate Credit Purchases " Credit Sales Calculation Credit Sales is found out by preparing Accounting Receivable T Account .                                                                   ABC Company                                      Performa of Debtors / Accounts Receivable T Account                                                         For The Current Accounting Cycle                                      Rs.                                                                             Rs. Opening Balance b/d  XXX