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30 Cards in this Set
- Front
- Back
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Plant asset |
Long-lived, tangible assets, such as land, buildings, and equipment, used in the operation of a business. |
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Depreciation |
The process by which businesses spread the allocation of a plant assets cost over its useful life. |
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Cost principle |
The principle that states that acquired assets and services should be recorded at their actual cost. |
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Land Improvement |
A depreciable Improvement to land, such as fencing, sprinklers, Paving, signs, and Lighting. |
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Capitalize |
Recording the acquisition of land, Building, or other assets by debiting an asset account. |
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Relative Market Value method |
A method of allocating the total cost 100% of multiple assets purchased at one time. Total cost is divided among the assets according to the relative Market values. |
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Capital expenditure |
An expenditure that increases the capacity or efficiency of a plant asset or extends its useful life. Capital expenditures are debited to an asset account. |
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Extraordinary repair |
Repair work that generates a capital expenditure because it extends the assets life past the normal expected life. |
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Revenue expenditure |
An expenditure that does not increase the capacity or efficiency of an asset or extend its useful life. Revenue expenditures are debited to an expense account. |
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Obsolete |
An asset is considered obsolete when a newer asset can perform the job more efficiently then the old. |
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Useful life |
Length of the service period expected from an asset. May be expressed in time, such as months or years, or usage, such as units produced, hours used or miles driven. |
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Residual value |
The expected value of a depreciable asset at the end of its useful life. |
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Depreciable cost |
The cost of a plant asset minus it's estimated residual value. |
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Straight line method |
The depreciation method that allocates an equal amount of depreciation each year. (Cost - Residual value) / Useful life |
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Book value |
A depreciable assets cost minus accumulated depreciation. |
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Units of production method |
A depreciation method that allocates a varying amount of depreciation each year based on an asset's usage. |
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Accelerated depreciation method |
The depreciation method that expenses more of the assets cost near the start of its useful life and less at the end of its useful life. |
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Double declining balance method |
An accelerated depreciation method that computes annual depreciation by multiplying the depreciation assets decreasing Book value by a constant percent that is 2 times the straight-line depreciation rate. |
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Modified accelerated cost recovery system |
A depreciation method that is used for tax purposes |
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Natural resource |
An asset that comes from the earth, and is consumed. |
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Depletion |
The process by which businesses spread the allocation of a natural resources cost over its usage. |
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Intangible asset |
An asset with no physical form that is valuable because of the special rights it carries. |
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Amortization |
The process by which businesses spread the allocation of an intangible assets cost over its useful Life Time. |
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Impairment |
A permanent decline in asset value. |
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Trademark |
An asset that represents distinctive identifications of a product or service. |
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Franchise |
Privilege granted by a business to sell a product or service under specified conditions. |
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License |
Privilege granted by a government to use public property in performing services. |
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Goodwill |
Excess of the cost of an acquired company over the sum of the market values of its net assets |
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Asset turnover ratio |
Measures how efficiently a business uses its average total assets to generate sales. Net sales / average total assets. |
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Commercial substance |
A characteristic of a transaction that causes a change in future cash flows. |
