TessMore Finance Blog

Annuities are those series of payments made or received at regular intervals over time. It could be lump-sum or installment; such costs include rent payments, car payments, interest from bonds, retirement pension income, and the like. Say you want to buy a car worth $3,000,000 and you decide to pay a 6 payment interval of $500,000 till the end of the stipulated period; this is referred to as an annuity. Difference Between an Annuity Due & Ordinary Annuity Annuity due is the kind of payments required to be made at the beginning of the payment interval period. At the same time, an ordinary annuity is a payment that permits you to make them at the end of the payment interval period. An example of an annuity due payment is rent, which must be paid at the start of the payment period, while that of the ordinary annuity is a dividend from stock investments or bonds. Difference Between Future Value of an Annuity Due & Present Value of an Annuity Due The future value of an interv

Before possessing an asset via purchase, especially a property, it is necessary to run an appraisal to determine its market value. This appraisal can be approached through three means: the income approach, the cost approach, and the sales comparison approach. The Income Approach The income approach is an appraisal method that permits appraisers to evaluate the worth of a property based on the income the property is expected to generate. It is often termed the income capitalization approach. This approach will require you to take the net operating income (NOI) of the rent received and divide it by the capitalization rate. The capitalization rate covers investment risk. It is calculated based on the property’s Interest Before Depreciation, Interest, and Taxes (IBDIT), bearing in mind the equity investment of appraised the property. In addition, the present interest rate on the property’s mortgages and the risk factor to cover the investment risks are also considered. The income app

Sometimes the business has to bear significant expenses in the process to raise the finance. The expenses may include the appraisal fees, registration charges, accounting fees, regulator charges, loan marketing expenses, regulator fees, and all other related expenses. If the fees for obtaining the loan are not material, the business may charge in the current period. However, if the amount is material, it must be amortized over the life of the loan to comply with the matching principle of accounting. Detailed concept When the business enters into the loan agreement or opts to restructure an existing loan, fees are associated with the process. These fees need to be recorded in the financial statement. However, the question arises if related fees should be charged in a single (current) accounting period or spread over the life of the loan. The concept of amortization arises because a loan is usually long-term and does not relate to a single (current) accounting period. Hence, as per t

Business owners are often at crossroads when they want to decide the kind of business entity they want to establish. They are faced with several different options, and they primarily choose that on the basis of what suits them better amidst the several different options that they have. In this regard, corporations tend to be one of the foremost and primitive choices for entrepreneurs. Here’s a detailed breakdown of corporations, and all the advantages and disadvantages that are associated with corporations. In technical terms, a corporation is created when it is incorporated by a group of shareholders who share ownership of a given corporation. This is represented by their holding of the stock shares, which further helps to pursue a common goal. Mostly, corporations are established with a common view of profit sharing. However, some corporations are also formed for other objectives, which might be important enough on a number of grounds. Within corporations too, there are several typ

Overview Internet expense is an expense for the business which is incurred during a financial year. As it is with all the other expenses of the business, the interest expense as well needs to be recorded for the amount of the expense that has been incurred during the year, regardless of the fact if any payments have been made for it or not. An interest expense is generally not recorded by the business during the course of the financial year. It is for this reason that companies then need to make a year-end adjusting entry to record interest expense for the year as it does for other accrued expenses such as rent or salaries. This accrued expense is known as interest payable. This is essentially an interest that been occurred but has not been paid yet by the company. Like other accrued expenses, any outstanding interest payments must also be recorded by the company. The adjusting entry made at the end of the financial year allows the company to recognize interest expense that has occ

Businesses most times need to purchase materials from suppliers. To determine the rate at which these businesses make payments to their suppliers, you need to understand how to calculate and improve the accounts payable turnover ratio. Accounts payable turnover ratio is one important accounting information every business should keep. With a knowledge of the turnover ratio, businesses will be able to make better financial decisions. What is Accounts Payable Turnover Ratio? The turnover ratio enables creditors to make decisions as to the creditworthiness of the business. With the data obtained from the account payable ratio, interested persons can have information on the payment history of the business. To calculate the accounts payable turnover ratio, all you need to do is to divide the total of all purchases made within that period by the average balance. A glance at the accounts payable turnover ratio will show you how many times a particular business has been able to offset its f