This is the period of time that it will be economically feasible to use an asset. Useful life is used in computing depreciation on an asset, instead of using the physical life. For example, a computer might physically...
This is the period of time that it will be economically feasible to use an asset. Useful life is used in computing depreciation on an asset, instead of using the physical life. For example, a computer might physically...
The acronym for earnings before interest, taxes, depreciation, and amortization. This measure is used by some companies as a supplementary disclosure, since EBITDA does not comply with U.S. GAAP (generally accepted...
The book value of an asset is the asset’s cost minus the accumulated depreciation since the asset was acquired. This net amount is not an indication of the asset’s fair market value. The book value of an...
An expense reported on the income statement that did not require the use of cash during the period shown in the heading of the income statement. The typical example is depreciation expense. Also, the write-down of an...
The assigning or dividing up of amounts. For example, depreciation is an allocation process because it assigns an asset’s cost to expense in each of the years the asset is expected to be used. There is also an...
A current or future cost that will differ among alternatives. For example, if a company is deciding whether to expand its sales territory, the real estate tax and depreciation on the company’s headquarters building...
The remainder or difference. In depreciation the residual value is the estimated scrap or salvage value at the end of the asset’s useful life. In the accounting equation, owner’s equity is considered to be...
Costs that have been divided up and assigned to periods, departments, products, etc. In depreciation it is the asset’s cost that is assigned to each of the years that the asset is in use. In cost accounting it is...
The book value of an asset is the amount of cost in its asset account less the accumulated depreciation applicable to the asset. The book value of a company is the amount of owner’s or stockholders’ equity....
The result of two or more amounts being combined. For example, net sales is equal to gross sales minus sales returns, sales allowances, and sales discounts. The net realizable value of accounts receivable is the...
Also referred to as book value or carrying value; the cost of a plant asset minus the accumulated depreciation since the asset was acquired. This net amount is not an indication of the asset’s fair market value....
and patents are examples of __________ assets. 10. The cost of equipment used in a business minus its accumulated depreciation is the equipment’s __________ value or carrying value. 11. The main purpose of...
Our Explanation of Bookkeeping provides you with a rich understanding of the recording of transactions. It then discusses the additional steps necessary for preparing accurate financial statements. This is great for...
. If any of the items recorded in Sundry Expenses begin to occur frequently and/or become significant, a new account should be opened for such items. Sundry expenses could also refer to a line on a company’s...
How many years is the appropriate time for depreciating leasehold improvements? Leasehold improvements should be depreciated or amortized according to the lessee’s normal depreciation policy except that the time period...
and the variable cost rate for mixed costs uses only two points of data. Mark as wrong Mark as right outlier This data point could be caused by a cost or quantity that is not in line with other observations. It is often...
(such as depreciation) before the amounts are posted to the general ledger accounts. The general ledger and the trial balance include account balances. 5. When a transaction is recorded in the general journal, which...
and is recorded in a contra asset account Accumulated Depreciation. The balance in Accumulated Depreciation is reported on the balance sheet as a separate deduction from the assets’ historical costs. Advantage of...
been set aside to replace certain assets. Examples of Past Use of Reserve Two examples where the term reserve had been used include the following contra asset accounts: Reserve for Doubtful Accounts was renamed to be...
An example of a variable cost is the cost of flour for a bakery that produces artisan breads. The greater the number of loaves produced, the greater the total cost of the flour used by the bakery. An example of a fixed...
they occur. Examples of Manufacturing Overhead Some examples of manufacturing overhead costs include the following: depreciation, rent and property taxes on the manufacturing facilities depreciation on the manufacturing...
of a contra asset account is Accumulated Depreciation. For instance, if a company has a plant asset such as Equipment with a debit balance of $92,000 and the account Accumulated Depreciation has a credit balance of...
is Accumulated Depreciation. Let’s assume that a company has property, plant and equipment with a cost of $200,000. The accumulated depreciation associated with these assets is $130,000. Therefore, the total assets...
rate, the asset will also be recorded at $50,000. A long-term asset that will be used in a business (other than land) will be depreciated based on its cost. The cost will be reported on the balance sheet along with the...
and matching principle. Book value of an asset is: the asset’s cost minus the asset’s accumulated depreciation. Book value of the liability Bonds Payable is the combination of the following: Maturity or par value of...
of presenting the statement of cash flows, the cash from operating activities begins with the company’s net income and is then adjusted for depreciation expense and the changes in the current assets and current...
and equipment (or) fixed assets This noncurrent section of the balance sheet reports the assets that are used in a business (buildings, equipment, etc.) and the related accumulated depreciation. property, plant and...
account Cash. Select... debit credit 10. The balance you would expect in Accumulated Depreciation. Select... Debit Credit 11. Sales Discounts will likely have a __________ balance. Select... debit credit 12. The entry...
Income tax allocations arising from differences between income tax rules and generally accepted accounting rules. For example, depreciation for income tax purposes is based on the income tax code and may require that...
as depreciation expense over several years. Often improvements of less than $500 or $1,000 are considered immaterial and are expensed immediately. Join PRO to Track Progress Mark the Question as Read Must-Watch Video...
. The objective of depletion is to match the cost of the natural resources that were sold with the revenues from the natural resources that were sold. Conceptually, depletion is similar to the depreciation of property,...
This term might be used to express the combined balances of two accounts. For example, if Equipment has a debit balance of $300,000 and the account Accumulated Depreciation on Equipment has a credit balance of $130,000,...
The change in total costs in response to the change in some activity. For example, some of the costs of owning and operating a vehicle will increase in total with an increase in miles driven. These are referred to as...
. This estimated amount is used to calculate the asset’s depreciation expense and it is often assumed to be zero. The term residual value may have other uses as well. For example, it is used when discussing leased...
Administrative expenses are part of the operating expenses (along with selling expenses). Administrative expenses include expenses associated with the general administration of the business. Examples include the salaries...
An asset account which is expected to have a credit balance (which is contrary to the normal debit balance of an asset account). The contra asset account is related to another asset account. For example, the contra asset...
of completing a sale or service. They are reported as a liability until they become earned. Mark as wrong Mark as right depreciation This is the systematic allocation of a plant asset’s cost to expense over the...
Featured Review
"I am currently managing a family business in Thailand, which mainly concerns the import and export of frozen seafood. I became a PRO user after going through the first few chapters and finding the material to be comprehensive, answering all the questions I had as I read along and even the ones I didn't know I had. I like how detailed the material is, while still being digestible and not too time consuming. The examples later on encourage me to think about each problem as an accountant would based on what I've learnt. Since reading the first 10 chapters, I now already have an easier time making sense of financial statements issued within the company, to the point where I was able to help my accountant make decisions about how we should manage certain situations regarding intricacies of the factory. I wanted to thank AccountingCoach and the team responsible for putting this great content together as it has had a very positive impact on my life and career, and helped me make decisions with more competency and confidence." - Shahzil Y.
Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials
Read all 2,645 reviews
For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.
We now offer 10 Certificates of Achievement for Introductory Accounting and Bookkeeping: