Depreciation
Basic Rules
Basic Rules
Accounting will be recorded on the basis of objective evidence.
What is Objectivity Principle?
The Term " " means opposite.
What is Contra?
What is known as the objectivity principle.
What is (GAAP) Generally accepted Accounting Principles?
Business documents that provide evidence of a transaction. eg. Invoices, receipts, bank statements, etc.
What is 'Source Documents'?
An Accounting estimate of the length of time a depreciable asset will function as intended. A key component in measuring annual depreciation using the straight line method (SLM).
What is Useful Life?
The term we use for the decrease in value of fixed assets over time.
What is a Depreciation?
The accounts we use to reduce the value of a related account.
What is Contra accounts?
Refers to the value of an asset per our G/L after depreciation is subtracted.
What are Net Book Value (NBV)?
How long the asset is expected to be used by the business.
What is Useful Life?
A system of accounting that requires the recognizing of revenue when payment is received and the recording of expenses when payments is made.
What is Cash Basis of Accounting?
The only fixed asset that doesn't depreciate.
What is a Land?
These are two accounts that are included in OWNER'S EQUITY.
What are CAPITAL and WITHDRAWALS?
A method of calculating annual depreciation expense based on a fixed assets original cost, useful life, and salvage value.
What is (SLM) Straight Line Method
The amount of depreciation recorded against a depreciable asset over 12 months.
What is Annual depreciation?
The amount that a fixed asset has been depreciated since its purchase, every depreciable asset has a related " ".
What is Accumulated Depreciation?
When we record depreciation, we record a decrease in the value of a fixed asset and an increase in the expense.
What is Depreciation Expense?
The accounting term used when REVENUE exceeds EXPENSES.
What is NET INCOME?
We report the costs that were incurred to help generate revenue in the same period as the revenue they helped to generate.
What is the The Matching Principle?
This accounting period produce 2 financial statements per year.
What is SEMI-ANNUALLY?
The value of the investment made by an owner in their business. A business owner's cash contributions/investments are recorded with an increase in Cash and an increase in Owner's Capital.
What is Owners Contributions?
The assumption that all company's intend to keep operating, and that all fixed assets will be used in the operations until the end of their useful life. This assumption is the basis for preserving the original cost of fixed assets in the general ledger rather than adjusting the value according to the changes in market value. A going concern doesn't intend on selling, its fixed assets, so market value is irrelevant.
What is Going Concern Assumption?
What is UNEARNED REVENUE?
The accrual-based accounting rule which stated that revenue should be recognized when they're earned, when goods are sold or services are provided-regardless of when payment is received.
What is Revenue Recognition Principle?
This is the number of financial statements produced in a company that runs an ANNUAL accounting period.
What is ONE?
A term used to describe our accounting system and which reminds us that no transaction can ever impact only on account.
What is Double-Entry Accounting System?