For example, a 50-year-old individual may make annual payments on a deferred annuity for 15 years. Since annuities are tax-deffered, they’lll only have to pay taxes on the payouts as received. Similar to the future value, the present value calculation for an annuity...
Because there are two types of annuities (ordinary annuity and annuity due), there are two ways to calculate present value. Using the present value formula helps you determine how much cash you must earmark for an annuity to reach your goal of how much money you’ll...
Contra asset accounts are typically used for accumulated depreciation, amortisation, and other accounting adjustments. For example, a company might have a contra asset account for depreciation expense and a separate asset account for equipment cost. Trade discounts...
And by comparing these contras against their corresponding parent accounts, you can better understand the actual value of the assets retained by your business. Because contra asset accounts are used so frequently, it’s worth spending a little bit more time on them...
A certificate of deposit is a type of savings account with a financial institution. It represents a certain amount of a saver’s capital that can’t be accessed by the saver for a specific period of time. In return for the use of their capital, the financial...
Cash equivalents include bank accounts and some types of marketable securities, such as debt securities with maturities of less than 90 days. However, cash equivalents often do not include equity or stock holdings because they can fluctuate in value. Cash totals...
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