Page 10 - 342_

first month, of Hence it is calculated
‘Bank insurance and road at 25% of the van’s

charges’, ‘overdraft tax. original cost.
interest’ and ‘hire ‘Depreciation

purchase interest’ – ’ – this is simply a
we have assumed that way of spreading the

avan is bought on hire cost of equipment,

purchase for £6,000 in machinery, motor

the first month and vehicles and other

£1,000 of equipment assets over their

is bought outright. useful lives.

Interest is payable on ‘Depreciation

the overdraft created of equipment’ – we

by this and other have assumed the

expenses and since the useful life of the

business has an equipment is five

overdraft some bank years and that it

charges are payable depreciates at an even

(the interest of the rate over its life.

overdraft is calcula- Hence it is calculated

ted as 18% on the at 20% of the

average overdraft each equipment’s original

quarter, and is paid cost per annum.

quarterly). These are ‘Depreciation

also interest charges of motor vehicle’ –

on equipment bought we have assumed the

on Hire Purchase. useful life is four

‘Motor years and that it

expenses’ – these depreciates at an even

include the cost, in the rate over its life. 10