What is Depreciation and methods of depreciation

What is Depreciation:-

Depreciation is a Process of allocating costs of an asset over its useful life. 

Methods of Depreciation: - There are several methods of Depreciation

i)                    Straight Line Method (SLM)

ii)                  Reducing Balance Method

iii)                Double Declining Method(DDB)

iv)                Sum of the Year Digit Method (SYD)

v)                  Modified Accelerated Cost Recovery System (MACRS).

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What is Working Capital

Working Capital: - Working Capital is the amount capital needed by an organization for running day to day business operation. Gross Working capital means the total amount of current assets. Net working capital means Current Asset minus current Liabilities.

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What is Opportunity Cost

Opportunity Cost: - The maximum benefit foregone due to choosing one alternative over another. For example consider the following investment opportunities and Return. We have BDT 1000 and we have three investment opportunities 

i) We can make a bank deposit which can earn 10% return.

ii) We can make investment in share which can gives 15% return.

iii) We can start a business which can earn 17% return.

Now if we choose to invest in share then 17% is the opportunity cost for investing in share.

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What is Variable cost

Variable cost: - Variable costs are those costs which are change with the output. Variable costs per unit is fixed but total is variable. Examples are Material Costs, Wages, Salesman Commission, e.t.c

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What is Fixed Cost

Fixed cost: - Fixed costs are those costs which are not change with the output. Fixed costs total is fixed but per unit is variable. Examples are Interest expense, Rent expense, Depreciation e.t.c

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