Deductions Allowed Under Business and Profession

 

Glossary 2

 Depreciation: Depreciation is a term used in accounting and taxation to describe the reduction in the value of an asset over time.

 Asset: An asset is any item of value that a business owns and expects to generate future economic benefits. Assets can include property, plant,equipment, machinery, and vehicles.

 Residual value: The residual value of an asset is the estimated value of the asset at the end of its useful life. It is the amount that the asset is expected to be worth when it is disposed of.

 Straight line depreciation: Straight-line depreciation is a method of depreciation where the asset is depreciated by a constant amount each year over its useful life.

 Depreciation expense: Depreciation expense is the amount of depreciation that is charged against the income of a business in a particular accounting period.

 Borrowed capital: Borrowed capital refers to the funds borrowed by a business from external sources, such as banks or financial institutions, to finance its operations or investments.

 Interest: Interest is the cost of borrowing money. It is the amount charged by the lender for the use of borrowed funds and is usually expressed as a percentage of the loan amount.

 Simple interest: Simple interest is a method of calculating interest on borrowed capital, where the interest is calculated on the principal amount of the loan.

 Compound interest: Compound interest is a method of calculating interest on borrowed capital, where the interest is calculated on the principal amount plus the accumulated interest.

 Deductible interest: Deductible interest is the interest paid on borrowed capital that is allowed as a deduction from the business's taxable income.

 Insured: The insured is the individual or business that purchases insurance coverage from an insurance company.

 Insurer: The insurer is the insurance company that provides the insurance coverage in exchange for the insurance premium paid by the insured.

 Policy: The policy is the legal contract between the insured and the insurer that outlines the terms and conditions of the insurance coverage.

 Premium: The premium is the amount paid by the insured to the insurer for the insurance coverage provided by the policy.

 Transaction tax: Transaction tax is a type of tax that is levied on various types of transactions, such as sales, purchases, or transfers of goods and services.