Depreciation Types and
Basic Rules
Basic Rules
The ASSETS a company uses in its operations to generate revenue.
What is FIXED ASSETS?
The term " " means opposite.
What is "Contra"?
The only fixed asset that doesn't depreciate.
What is Land?
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 original purchase price of the asset.
What is 'Cost of the Asset'?
The term we use for the decrease in value of fixed assets over time.
What is Depreciation?
A term used to describe our accounting system, and which reminds us that no transaction can ever impact only one account.
What is Double-Entry Accounting System?
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?
We recognize expenses when they are incurred, regardless of when they are paid.
What is Expense Recognition Principle?
What is known as the objectivity principle.
What is (GAAP) Generally accepted Accounting Principles?
The ease with which an asset can be converted into cash. Assets are arranged in the chart of accounts in " " order.
What is Liquidity?
A method of calculating annual depreciation expense based on a fixed assets original cost, useful life and salvage value.
What are (SLM) Straight Line Method?
This amount of depreciation recorded against a depreciable asset over 12 months.
What is Annual Depreciation?
This refers to the state of being, which occurs when an object is no longer wanted, even though it may still be in good working order.
What is Obsolescence?
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 Matching Principle?
The assumption that all companies intend to keep operating and that all fixed assets will be used in the operations until the end of their useful life. The assumption is the basis for preserving the original cost of fixed assets in the G/L rather than adjusting the value according to changes in market value.
What is Going Concern Assumption?
A system of accounting that requires the recognizing (recording) of revenue when payment is received and the recording of expenses when payments are made.
What is Cash Basis of Accounting?
The accounting estimated of the value of a fixed asset at the end of its useful life.
What is Salvage Life?
The assets a company uses in its operations to generate revenue and which it doesn't expect to convert into cash.
What is Property, Plant and Equipment?
The accrual-based accounting rule which states 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?
Some transactions often occur out of view, we'll have to rely on something other than visual cues to inform us that a transaction has taken place. Bookkeepers and Office Professionals rely on business documents to indicate that a transaction has taken place.
What is Source Documents?
Transactions that impact more than 2 accounts aren't necessarily more difficult to record than any other but their unique quality earned them a different name.
What is Compound Entry?
The amount that a fixed asset has been depreciated since its purchase.
What is Accumulated Depreciation?
Accounting software we'll learn about next semester.
What is Quickbooks?