What are the three methods of depreciation and meaning of amortization?

(This article explains three methods of depreciation applied on fixed assets and the meaning of amortization and difference between depreciation and amortization.) Depreciation means writing off the value of an asset over a period of time due to wear and tear, age and obsolesces. There are three major methods of charging depreciation or recognition of the cost…

What are other current liabilities?

( This post explains,  the difference between other current liabilities and the current liabilities  for the purpose of working capital appraisal and items like contingent liabilities, netting of current liabilities and current assets.) The current liabilities are those dues, to be settled within 12 months from reporting date, including overdraft and loan installments payable within 12…

What are other non-current asset items?

(This article identifies the non-current assets to be separated  from current assets while appraising  the working capital limits to borrower). The figures of ‘Current Assets’ appearing on the balance sheet is normally a consolidated figure of ‘Current Assets’ and ‘Other non-current Assets’. Hence, the Non-Current Asset items are to be separated from current assets and that only the…

How to analyse a Balance-sheet?

(This article explains the meanings of  current assets, fixed assets, intangible assets, share capital, reserve and surplus, long-term liabilities, current liabilities, contingent liabilities & assets.) A balance sheet is a financial statement of an entity which is prepared for reporting of financial position of the business as at a particular date. The balance sheet is so…

Cash Budget pattern of financing

[Cash Budget pattern of financing seasonal productions like sugar, tea and construction activities] The request for financial assistance from  business enterprises dealing in seasonal products like sugar, tea, construction activities, film industries, order based activities etc. are facilitated by the banks through Cash Budget  financing plans. In such pattern of business dealings, the requirement of…

How to compute working capital limits under Turn-over method/Nayak committee

(Nayak Committee norms for computation of working capital limits) The term working capital means sum of the funds invested at various current assets used in the operating cycle, by the industrial and trading establishments. Operating cycle means the length of time required to convert ‘Non-Cash current assets’, (like raw material (RM), work in process (WIP), finished goods (FG),…

What are the methods used for working capital appraisal?

(This post explains the definitions of   working capital ,  Operating cycle  and various methods of working capital appraisal viz.  Tandon’s first method, Tandon’s second method,Turnover method or Nayak committee norms, Cash budget method, Chore committee norms,  Maximum permissible bank finance, Minimum permissible bank finance and Important things to note in assessment of working capital…