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Accounting ll

Ch. 21 vocab.

QuestionAnswer
Cash and other assets expected to be exchanged for cash or consumed within a year. Current assets
Assets that will be used for a number of years in the operation of a business. Plant assets
Financial statements contain all information necessary to understand a business's financial condition. Adequate disclosure
Businesses may have three major types of plant assets - equipment, buildings, and land. FYI – 3 major plant assets
The actual amount paid for merchandise or other items bought is recorded. Historical cost
Land and anything attached to the land. Real property
All property not classified as real property. Personal property
The value of an asset determined by tax authorities for the purpose of calculating taxes. Assessed value
Assessed value is usually based on the judgment of persons referred to as assessors (elected by citizens or specially trained employees of a governmental unit). FYI – assessed value extra
Revenue from a business activities and expenses associated with earning that revenue are recorded in the same accounting period. Matching Expenses with Revenue
The portion of a plants asset's cost that is transferred to an expense account in each fiscal period during a plant asset's useful life. Depreciation Expense
The original cost of a plant asset includes all costs paid to make the asset usable to a business. These costs include the price of the asset, delivery costs, and any necessary installation costs. Original Cost
The amount an owner expects to receive when a plant asset is removed from use. Estimated Salvage Value
Estimated salvage value may also be referred to as residual value or scrap value. FYI – Residual Value or Scrap Value
The total amount of depreciation expense is distributed over the estimated useful life of a plant asset. Estimated Useful Life
Is caused by wear from use and deterioration from aging and weathering. Physical Depreciation
Occurs when a plant asset becomes inadequate or obsolete. Functional Depreciation
No longer satisfactorily perform the needed service. Inadequate
A newer asset can operate more efficiently or produce better service. Obsolete
Charging an equal amount of depreciation expense for a plant asset in each year of useful life. Straight-line Method of Depreciation
The total amount of depreciation expense that has been recorded since the purchase of a plant asset. Accumulated Depreciation
The original cost of a plant asset minus accumulated depreciation. Book Value of a Plant Asset
An accounting form on which a business records information about each plant asset. Plant Asset Record
At any time, the book value of plant assets can be calculated by subtracting Accumulated Depreciation form the plant asset account. FYI – Calculating book value any time
A plant asset may be sold at any time during the asset's useful life. When a plant asset is sold, its depreciation form the beginning of the current fiscal year to the date of disposal is recorded. FYI – plant asset sold
Revenue that results when a plant asset is sold for more than the book value. Gain on Plant Assets
A gain form the sale of plant assets is not an operating expense. Therefore, Gain on Plant Assets is listed in a classification titled Other Revenue in the chart of accounts. Other Revenue
The loss that results when a plant asset is sold for less than book value. Loss on Plant Assets
A loss from the sale of plant assets is not a operating expense. Therefore, Loss on Plant Assets is listed in a classification titled Other Expenses in the chart of accounts. Other Expenses
Multiplying the book value by a constant depreciation rate at the end of each fiscal period. Declining-Balance Method of Depreciation
Many businesses us a declining-balance rate that is two times the straight-line rate. This method of depreciation is referred to as the double declining-balance method. FYI – Double Declining-Balance Method
A plant asset is never depreciated below its estimated salvage value. FYI – Plant Asset is Never
Created by: mmincy