Accounting 202 Chapter 10
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38 terms
Terms | Definitions |
|---|---|
 Accelerated Depreciation Method | Method that produces larger depreciation charges in the early years of an asset's life and smaller charges in its later years |
| Amortization | Process of allocating the cost of an intangible asset to expense over its estimated useful life |
| Asset Book Value | Asset's acquisition costs less its accumulated depreciation (or depletion or amortization). Also sometimes used synonymously as carrying or book value of an asset |
| Betterments | Expenditures to make a plant asset more efficient or more productive. Also called improvements |
| Capital Expenditures | Addition costs of plant assets that provide material benefits extending beyond the current period |
| Change in an Accounting Estimate | An estimate that changes due to new information, subsequent developments, or improved judgments that impacts current and future periods. |
| Copyright | Right giving the owner the exclusive privilege to publish and sell musical, literary, or artistic work during the creator's life plus 70 years. |
| Cost | All normal and reasonable expenditures necessary to get an asset in place and ready for its intended use. |
| Declining Balance Method | Method that determines depreciation charge for the period by multiplying a depreciation rate (often twice the straight-line rate) by the asset's beginning-period balance. |
| Depletion | Process of allocating the cost of natural resources to periods when they are consumed and sold |
| Depreciation | Expense created by allocating the cost of plant and equipment to periods in which they are used. Represents the expense of using the asset |
| Extraordinary Repairs | Major repairs that extend the useful life of a plant asset beyond prior expectations. Treated as a capital expenditure |
| Franchises | Privileges granted by a company to sell a product or service under specified conditions |
| Goodwill | Amount by which a company's (or segment's) value exceeds the value of its individual assets less its liabilities. |
| Impairment | Diminishment of an asset value |
| Inadequacy | Condition in which the capacity of plant assets is too small to meet the company's production demands. |
| Indefinite Life | Asset life that is not limited by legal, regulatory, contractual, competitive, economic, or any other factor. |
| Intangible Assets | Long term assets used to produce or sell products or services usually lack physical form and have uncertain benefits |
| Land Improvements | Assets that increase the benefits of land, have a limited useful life, and are depreciated |
| Lease | Contract specifying the rental of property |
| Leasehold | Rights the lessor grants to the lessee under the terms of a lease |
| Leasehold Improvements | Alterations or improvements to leased property such as partitions and storefronts |
| Lessee | Party to a lease who secures the right to possess and use the property from another party |
| Lessor | Party to a lease who grants another party (the lessee) the right to possess and use its property |
| MACRS (Modified Accelerated Cost Recovery System) | Depreciation system required by federal income tax law |
| Natural Resources | Assets physically consumed when used. Examples are timber, mineral deposits, and oil. |
| Obsolescence | Condition in which, because of new inventions and improvements, a plant asset can no longer be used to produce goods or services with a competitive advantage |
| Ordinary Repairs | Repairs to keep a plant asset in normal, good operating condition. Treated as a revenue expenditure and immediately expensed |
| Patent | Exclusive right granted to its owner to produce and sell an item or to use a process for 20 years. |
| Plant Asset Age | Estimate of the age of a company's plant assets, computed by dividing accumulated depreciation by depreciation expense |
| Plant Assets | Tangible long lived assets used to produce or sell products and services. Also called property, plant, and equipment (PP&E) |
| Revenue Expenditures | Expenditures reported on the current income statement as an expense because they do not provide benefits in future periods |
| Salvage Value | Estimate of the amount to be recovered at the end of an asset's useful life. Also called residual or scrap value. |
| Straight Line Depreciation | Method that allocates an equal portion of the depreciable cost of plant asset (cost minus salvage) to each accounting period in its useful life. |
| Total Asset Turnover | Measure of a company's ability to use its assets to generate sales. Computed by dividing net sales by average total assets |
| Trademark (Trade Name or Brand Name) | Symbol, name, phrase, or jingle identified with a company, product, or service |
| Units of Production Depreciation | Method that charges a varying amount of depreciation expense for each period of an asset's useful life. |
| Useful Life | Length of time an asset will be productively used in the operations of a business. Also called service life or limited life. |
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