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Accounting 2037 - Chapter 20 Vocab

Terms in this set (41)

Accelerated depreciation method
Records the highest deprecation in the first year of an asset's service life and lower depreciation in subsequent years.
Accumulated depreciation
Total amount of depereciation expense recorded over the life of an asset to date.
Amortization
The process of decreasing an amount over a period. When used in the context of a loan, amortization is the process by which your loan principal decreases over the life of your loan.
Amortization expense
Portion of the acquisition cost of an intangible asset that a company allocates as an expense to each accounting period over the asset's service life.
Book value
Asset's original cost minus the related accumulated depreciation.
Capital expenditure
Cost that increases the benefits a company will obtain from an asset.
Copyright
Exclusive right granted by the US government to publish or sell literary or artistic products for the life of the author plus an additional 70 years.
Cost
An amount that has to be paid or spent to buy or obtain something.
NOTE: (Definition was not in the book, but pretty self-explanatory)
Depreciable cost
Cost of a physical asset less its residual value
Depreciation
A reduction in the value of an asset with the passage of time, due in particular to wear and tear.
NOTE: (Definition was not in the book, definition is from Google).
Depreciation expense
Part of the cost of property, plant, and equipment (physical asset) that a company allocates as an expense to each accounting period in which the company uses the asset.
Depletion
Reduction in number or quantity of something.
NOTE: (Definition was not in the book, but pretty self-explanatory)
Depletion expense
Portion of the cost (less the estimated residual value) of a natural resource asset that a company allocates as an expense to each accounting period over the asset's service life.
Development
Translation of research into a plan or design for a new or improved product or process.
Double-declining-balance method
Computes depreciation expense by multiplying the book value of an asset at the beginning of the period by twice the straight-line method.
Estimated residual value
Cash a company estimates it will receive from the sale or disposal of an asset at the end of its estimated service life.
Estimated service life
Life over which a company expects an asset to be useful.
Franchise
Agreement entered into by two parties where, for a fee, one party gives the other party rights to perform certain function or sell certain products or services over the legal life of the franchise.
Functional causes of depreciation
Limit the life of the asset, even though the physical life is not exhausted.
Goodwill
Difference between the total price a company paid to buy another company and the market value of the identifiable net assets it acquired.
Impairment
Occurs when the expected future cash flows from an asset are less than book value of that asset.
Intangible assets
Company's long-term assets that do not have a physical substance.
Maintenance and customer-support costs
Computer software costs that a company incurs after it release that software.
Modified Accelerated Cost Recovery System (MACRS)
Accelerated depreciation method acceptable under the Internal Revenue Code and used by companies for income tax purposes.
Natural resource asset
Assets that are used up as they are extracted, mined, dug up, or chopped down.
Net asset value
Cost of an asset less its accumulated depreciation.
Operating capability
Company's ability to continue a given level of operations.
Operating efficiency
How well a company uses its assets to generate revenue.
Operating expenditure
Cost that only maintains the benefits that a company originally expected from an asset.
Patent
Exclusive right granted by the US government giving the owner of an invention the control of its manufacture or sale for 20 years from the date of the patent application.
Physical causes of depreciation
Include wear and tear due to use, deterioration and decay caused by the passage of time, and damage and destruction.
Property, plant, and equipment
All of the physical (tangible) long-term assets a company uses in its operations
Rational
A characteristic of depreciation that relates it to the benefits an asset produces in period.
Research
Activity aimed at the discovery of new knowledge intended for use in developing a new or improved product or process.
Software production costs
Costs of designing, coding, testing, and preparing documentation and training materials.
Straight-line method
Computes deprecation expense by allocating the cost of an asset, less its estimated residual value, equally to each period of the asset's estimated service life.
Sum-of-the-years'-digits method
Computes depreciation expense by multiplying the depreciable cost of an asset by a fraction that declines each year.
Systematic
Following a formula for the calculation of depreciation.
Trademark or Tradename
Exclusive right granted by the US government (or the government of another country) to use a name or symbol for product identification.
Unit cost
Computer software cost of producing software, such as costs of the disks and the duplication of the software, packaging, documentation, and training materials.
Units-of-production method
Used to compute depletion (or depreciation) based on the level of an asset's physical activity.
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