A few questions question, accounts, following, difference, understand

edgeon

Hi All,

Can you please help me understand the following :

> Differences between accounts payable and accrued expenses
> Explain the difference between Regular Auction Cycle/Multiple Price Method and Regular Auction Cycle/Single Price Method
> We know that accumulated depreciation is a contra a/c. My question is depreciation a/c also a contra a/c? if not, why?

Thanks in advance,

Vipin

Regards,
Vipin

FVPV

Don't have my books at the moment so you may want to double check:

1. Accounts payable is a liability account on the balance sheet. Essentially you owe others money and have to pay them in the future. E.g. you received inventory from a supplier but haven't paid the supplier yet. Accrued expense is often associated with accounts payable, but it's an income statement account. According to the matching principle, expense should be recognize when income is earned. So accrued expense occurs when you need to record an expense, but haven't paid yet. E.g. you haven't paid out pay cheques to your employees yet, but since they were earning income for the company, salary expense must be recognized. Thus, you get accrued expense.

2. Is this on bonds? Don't really remember.

3. Depreciation is an expense account on income statement. It's tied to accumulated depreciation. E.g. you bought an asset for $100, useful life of 5 years, straight line amortization, no salvage value:
Time of purchase: asset = 100, acc. depr. = 0, depr = 0
Year 1: asset = 100, acc. depr. = 20, depr = 20
Year 2: asset = 100, acc. depr. = 40, depr = 20
Year 3: asset = 100, acc. depr. = 60, depr = 20
Annual depreciation just adds up to accumulated deprecation. At the end of 3 years, the net book value of the asset is 100 - 60 = 40.

Bulla564

2. Itz been long time but if I remember correctly, In single price auction the higher bidder gets all the bonds. In multiple price auction, parties get bonds at a rate at which they made the bid but quantity may not be same.
Someone may correct me if needed

bluejazzy

2. Explain the difference between Regular Auction Cycle/Multiple Price Method and Regular Auction Cycle/Single Price Method

Multiple Price - The winning bidders receive the bonds at the price they bid and earn the yield on the bonds corresponding to their price.

Single Price - ALL winning bidders receive the same yield, all pay the same price, which corresponds to the highest yield the government will accept.

for example, you and I are bidding on bonds being issued by say the US government. If you bid a price reflecting a yield of 5% and my price reflects a yield of 6%, under multiple price if you and I both were winning bidders I'd earn 6% on my bonds and you''d earn 5%. Under single price, say the government is willing to accept a price reflecting a 6% yield max, then if you and I were winning bidders we'd both get a 6% yielding bond.