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19 Cards in this Set
- Front
- Back
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Depreciation |
Decrease in value of physical property due to passage of time |
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Economic Depreciation |
Measure of the decrease in value of an asset over time |
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Accounting Depreciation |
Method of allocating the cost of a tangible asset over it's useful life and is used to account for decline in value |
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Value |
Present worth of all future amounts that are to receive through ownership of a particular property |
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Types of Value |
1. Market Value 2. Utility/Use Value 3. Fair Value 4. Book Value 5. Salvage/Resale Value 6. Scrap Value |
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Causes of Depreciation |
1. Wear and tear 2. Depletion 3. Obsolescence 4. Lapse of time |
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Purpose of determining depreciation |
1. To provide for the technology of capital which has been invested in physical property 2. Unable the cost of depreciation The recharge to the cause of producing products or services that result from the use of property |
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Types of Depreciation |
1. Normal Depreciation 2. Depreciation due to changes in price levels 3. Depletion |
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Physical Depreciation |
Lessening of the physical ability of a property to produce results common causes are worn and deterioration. |
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Functional Depreciation |
Listening in the demand for the function which a property was designed to render. causes are in a decreasy change in styles, or population center shifts. |
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Straight Line Method |
Loss in value is directly proportional to the age of the property |
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Sinking Fund Method |
Depreciation is equal to the accumulated amount. |
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Declining Balance Method |
Constant percentage method or Matheson Formula. Depreciation is a fixed percentage of the book value at the beginning of the year. |
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Double Declining Balance Method |
Same as DBM but k is replaced by 2/L |
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Sum of year digit method |
Depreciation charge varies year to year |
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Sunk Cost |
Cost which cannot be recovered due to reasons. A result of trading and asset without knowing the current book value. |
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Depreciation Tax Shield |
Depression sum of money needed for the payments of the depreciation taxes. |
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Depletion Expense |
The decrease in worth of a natural resource due to gradual extraction of each content. |
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Valuation |
The quantitative process of determining the fair value of an asset, investment, or firm which is carried out by a professional appraiser |
