![]() read more, or lines of credit Lines Of Credit A line of credit is an agreement between a customer and a bank, allowing the customer a ceiling limit of borrowing. It is a hybrid security since it combines debt and equity features and provides additional benefits to the holder. read more against any borrowings like bonds, loans, convertible debt Convertible Debt Convertible debt is a type of debt instrument that can be converted at the company's discretion into equity shares. Interest Expense Interest Expense Interest expense is the amount of interest payable on any borrowings, such as loans, bonds, or other lines of credit, and the costs associated with it are shown on the income statement as interest expense. Even for a retail shop, rent is fixed and is not dependent on the number of sales. This amount is not dependent on the performance of the company. The rent paid for the space used to conduct the business is a fixed cost. For example, insuring the factory building is a fixed cost irrespective of the number of units produced within the factory. It is a periodic premium paid under the agreement of policy. An amortization expense of $10,000 will be incurred as a fixed book cost. It should be amortized over the five years before it expires. For example, suppose ABC Corporation spends $50,000 to acquire a patent that will expire in 5 years. It also includes the repayment of a loan. They are considered as long-term or long-living assets as the Company utilizes them for over a year. read more is used to lower the cost value of intangible assets Intangible Assets Intangible Assets are the identifiable assets which do not have a physical existence, i.e., you can't touch them, like goodwill, patents, copyrights, & franchise etc. This time frame is typically the expected life of the asset. #2 – AmortizationĪmortization Amortization Amortization of Intangible Assets refers to the method by which the cost of the company's various intangible assets (such as trademarks, goodwill, and patents) is expensed over a specific time period. It is a fixed cost as it is incurred with the same value over the asset’s life. Depreciation enables companies to generate revenue from their assets while only charging a fraction of the cost of the asset in use each year. Its value indicates how much of an asset’s worth has been utilized. The gradual writing-off of a tangible asset over its life is called depreciation Depreciation Depreciation is a systematic allocation method used to account for the costs of any physical or tangible asset throughout its useful life. Top 11 Most Common Examples of Fixed Cost #1 – Depreciation Top 11 Most Common Examples of Fixed Cost.Let us discuss each one of them in detail – You are free to use this image on your website, templates, etc., Please provide us with an attribution link How to Provide Attribution? Article Link to be Hyperlinked #9 – Advertising and Promotional Expense. ![]() Here is the list of the top 11 most common Fixed Costs – Each example states the topic, the important reasons, and additional comments as needed. It is the type of cost which is not dependent on the business activity. The following example provides an outline of the most common fixed costs Fixed Costs Fixed Cost refers to the cost or expense that is not affected by any decrease or increase in the number of units produced or sold over a short-term horizon. Fixed cost refers to those costs incurred by the company during the accounting period under consideration that has to be paid no matter whether there is any production activity or the sale activity in the business or not and the, examples of which include rent payable, salaries payable, interest expenses and other utilities payable.
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