Depreciation Basics
The term for spreading the cost of a plant asset over its useful life
What is depreciation?
This method assumes assets lose value evenly over time
What is the straight-line method?
The account debited when recording depreciation expense
What is Depreciation Expense?
True or False: Companies can legally choose any depreciation method for each asset
What is True?
This phrase in Micah 6:8 refers to treating people fairly
What is "do justice"?
This term refers to the value expected to remain at the end of an asset’s life
What is salvage value?
This method is based on how much the asset is used
What is the units-of-activity method?
The account credited in a depreciation entry
What is Accumulated Depreciation?
A company inflates asset life to show higher profits. This violates which accounting principle?
What is the matching principle?
This connects to showing concern for stakeholders in your financial reporting
What is "love kindness"?
The formula: (Cost - Salvage Value) ÷ Useful Life
What is the straight-line method of depreciation?
This method uses a constant rate applied to the asset’s book value
What is the declining-balance method?
Depreciation affects this type of asset account
What is a contra asset account?
Choosing depreciation methods to mislead investors breaks this professional obligation
What is ethical responsibility/accounting integrity?
This connects to acknowledging limits and revising estimates when needed
What is "walk humbly with your God"?
Depreciation is an allocation of cost, not this
What is valuation?
If an asset is used more heavily in one year than another, this method is most appropriate
What is the units-of-activity method?
If you buy a truck on July 1 and use straight-line, you need to do this with depreciation for the first year
What is prorate it for half the year?
A business that revises depreciation estimates honestly is fulfilling which value from Micah 6:8?
What is walking humbly (with integrity)?
Choosing the ethical, honest method even when no one is watching is this value from the verse
What is justice or humility?
Depreciation affects this financial statement by reducing net income
What is the income statement?
Changing estimates of useful life requires this kind of adjustment
What is a prospective change (adjust going forward only)?
If you incorrectly estimate the useful life, you must do this in future years
What is revise depreciation prospectively?
Using fair and honest accounting to protect stakeholders reflects this biblical principle
What is doing justice?
The overall message of Micah 6:8 calls for aligning accounting practices with these three principles
What are justice, kindness, and humility?