Xyz Ltd has a revenue of Rs 800000and it has provided for depriciation at 10percent slm method. It has cash expenses rs 200000.the taxes are 50percent p. a. Show the net earning on accounting approach basis and cash flow basis
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Straight Line Depreciation Method
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WHAT IS STRAIGHT LINE DEPRECIATION METHOD?
Depreciation is an accounting method of allocating the asset cost over a period of time.to treat the value of an asset acquired by the business. When an asset is acquired by a Company, it is not expensed all at once at the time of acquisition but it is divided over a period of time i.e. over its useful life. There are various types of depreciation method, however, the most common is the Straight line depreciation method.
In a straight line depreciation method, it is assumed that the asset uniformly depreciates over its useful life. The cost of the asset is evenly spread over its useful and functional life. Thus, the depreciation expense on the income statement remains the same for a particular asset over the period. As such the income statement is expensed evenly, so is the value of the asset on the balance sheet. The carrying amount of the asset on the balance sheet reduces by the same amount.
Straight Line Depreciation Method
Home » Accounting » Income Statement » Straight Line Depreciation Method

WHAT IS STRAIGHT LINE DEPRECIATION METHOD?
Depreciation is an accounting method of allocating the asset cost over a period of time.to treat the value of an asset acquired by the business. When an asset is acquired by a Company, it is not expensed all at once at the time of acquisition but it is divided over a period of time i.e. over its useful life. There are various types of depreciation method, however, the most common is the Straight line depreciation method.
In a straight line depreciation method, it is assumed that the asset uniformly depreciates over its useful life. The cost of the asset is evenly spread over its useful and functional life. Thus, the depreciation expense on the income statement remains the same for a particular asset over the period. As such the income statement is expensed evenly, so is the value of the asset on the balance sheet. The carrying amount of the asset on the balance sheet reduces by the same amount.
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Revenue = 800000
Depreciation = 10% of revenue
= 10 X 800000 / 100
= 80000
=Revenue - Depreciation
= 800000 - 80000
= 720000
Cash Expenses = 200000
= Revenue - Expense
= 720000 - 200000
= 520000
Taxes = 50%
= 520000 X 50%
Net Earning = 260000
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