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In accounting, an accretion expense is a periodic expense recognized when updating the present value of a balance sheet liability, which has arisen from a company's obligation to perform a duty in the future, and is being measured by using a discounted cash flows ("DCF") approach. [1] See also Accretion (finance).
A company's earnings before interest, taxes, depreciation, and amortization (commonly abbreviated EBITDA, [1] pronounced / ˈ iː b ɪ t d ɑː,-b ə-, ˈ ɛ-/ [2]) is a measure of a company's profitability of the operating business only, thus before any effects of indebtedness, state-mandated payments, and costs required to maintain its asset base.
In accounting, amortization is a method of obtaining the expenses incurred by an intangible asset arising from a decline in value as a result of use or the passage of time. Amortization is the acquisition cost minus the residual value of an asset, calculated in a systematic manner over an asset's useful economic life.
The asset is depreciated, usually straight-line, over 40 years (depreciation expense of $32.06 per year). The liability is accreted (interest for each period is calculated and added to the balance), using the interest method. (Accretion expense would be $115.41 the first year, $125.79 the second year, etc.)
The primary formula for calculating the interest accrued in a given period is: I A = T × P × R {\displaystyle I_{A}=T\times P\times R} where I A {\displaystyle I_{A}} is the accrued interest, T {\displaystyle T} is the fraction of the year, P {\displaystyle P} is the principal, and R {\displaystyle R} is the annualized interest rate.
In finance, the term accretion refers to a positive change in value following a transaction; it is applied in several contexts. When trading in bonds , accretion is the capital gain expected when a bond is bought at a discount to its par value , [ 1 ] given that, it is expected to mature at par .
Factor in living expenses, debt repayment, savings, and investments. Then look at how your asset allocation is divided between bonds, cash, and stocks so that it’s balanced for your risk ...
The accounting equation plays a significant role as the foundation of the double-entry bookkeeping system. The primary aim of the double-entry system is to keep track of debits and credits and ensure that the sum of these always matches up to the company assets, a calculation carried out by the accounting equation.