Thursday, 8 November 2018

AMORLINC Finance Function in Google Sheet



How to Calculate AMORLINC Finance Function in Google Sheet


AMORLINC Finance Function in Google sheet return the depreciation of an asset for an accounting period or the prorated depreciation depends on the date of purchase like the middle of the year. 



What is Depreciation?

Business and Financial Modeling from the Wharton School

Depreciation is the method of cost allocation of the fixed asset over its useful or economic life. It is a non-cash expense and an accounting convention to write off the asset's value over the economic life of the asset. 

Example 


A firm buys a Machinery for production for $ 100,000 and he knows that the machinery can be used for the next 5 years. After five years, if the firm replaces the machine, it may get an amount of $ 10,000.

Here The Original Cost of the Machine is $ 100,000. The useful life of the Machine is 5 years. Salvage value is $ 10,000.  

So the simple calculation of the Depreciation is as given below

Depreciation = Cost Price - Slavage Value
                       The useful life of Asset

                           =  $ 100000 - $10000
                                           5
                           = 18000 
In this example, the depreciation needs to charge $ 18,000 per year. 


This is the common scenario of depreciation, but the method of calculation and treatment may differ based on the firm's policy on the depreciation and the accounting standard of the firm.




AMORLINC Finance Function calculates the prorated linear depreciation of an asset for a specified accounting year. This system provides for users of Frech accounting system.

Syntax

AMORLINC(cost, purchase_date, first_period_end, salvage, period, rate, [basis]).

Compulsory Parameters 

Cost: Original Cost or Purchase Price of the Asset 
Purchase Date: It indicates the date on which the asset purchased. 
First Period End: It denotes the end of the first period
Salvage: It means the Remaining value of the asset after the economic life of the asset.
Period: It denotes the period for which the depreciation is calculated.
Rate : Rate indicates the annual depreciation.


Optional Parameter

Basis (Day Count Convention): This integer value indicated the method of the financial day counting.




How to Use AMORLINC Finance Function in Google Sheet



To understand the usage of AMORLINC Finance Function in Google sheet, we need to consider an example.

Suppose the cost of purchase of an Asset is $ 1,000. The purchase date of the asset was 20-07-1969. The first period end date is 20-08-1969. The salvage value estimated at $ 100. The period is for 6 years. Date depreciation is 15%. Day Count Convention is 1.

Let us prepare a table with these data. 


  
After entering the Formula,

=AMORLINC(F3,F4,F5,F6,F7,F8,F9) and we will get the result as $ 3,000.




All the dates entered must be used Date Function in Google sheet or any other Date parsing functions. The use of the statement in Date cells will not accept and may return errors

That 's all šŸ˜ŠšŸ˜ŠšŸ˜Š


                                             
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