D104 Unit 4 Vocab Flashcards
(23 cards)
Activity Method
A depreciation method in which depreciation is a function of use or productivity instead of the passage of time.
Amortization
The accounting process of allocating the cost of intangible assets (i.e., patents and goodwill) to expense.
Asset Turnover
A ratio that gives the dollars of sales produced by each dollar invested; calculated by dividing net sales by average total assets for the period.
Composite Approach
A depreciation method that depreciates a collection of assets that are heterogeneous and have different lives.
Composite Depreciation Rate
Depreciation per year divided by the total cost of the assets.
Cost Depletion
The accounting process of allocating the cost of natural resources (i.e., timber, gravel, oil, and coal) to expense.
Declining-balance Method
A depreciation method that applies a constant rate to the declining book value of the asset and produces a decreasing annual depreciation amount over the useful life of the asset.
Decreasing-charge Methods
A depreciation method which provides for a higher depreciation cost in the earlier years and lower charges in later periods.
Depletion
The accounting process of allocating the cost of natural resources (i.e., timber, gravel, oil, and coal) to expense.
Depreciation
The accounting process of allocating the cost of tangible assets to expense in a systematic and rational manner to those periods expected to benefit from the use of the asset.
Development Costs
The costs incurred to extract natural resources and to get them ready for production or shipment.
Exploration Costs
The costs incurred to find natural resources.
Group Method
A depreciation method that depreciates a collection of assets that are similar in nature.
Impairments
When the carrying amount of an asset is not recoverable and therefore a write-off is needed.
Natural Resources
Wasting assets such as petroleum, minerals, and timber.
Recoverability Test
A screening device used to determine whether an impairment has occurred.
Restoration Costs
The costs incurred to restore property to its natural state after extraction of natural resources has occurred.
Return On Assets (ROA)
Net income divided by average total assets.
Salvage Value
The estimated amount that will be received at the time the asset is sold or removed from service.
Straight-line Method
A depreciation method in which periodic depreciation is the same throughout the service life of the asset.
Sum-of-the-years’-digits Method
A depreciation method that produces decreasing periodic depreciation by applying a decreasing fraction to the depreciable cost of the asset.
Depreciation expense
is the portion of the cost of a tangible fixed asset (like machinery, vehicles, or buildings) that is allocated as an expense over each accounting period during the asset’s useful life.
In simpler terms, it reflects how much of an asset’s value has been used up in a given period due to wear and tear, age, or obsolescence.
Accumulated Depreciation
s the total amount of depreciation expense that has been recorded against a fixed asset since the asset was put into use.
It is a contra asset account, meaning it reduces the gross amount of fixed assets reported on the balance sheet.
