Bus 212 Week 3 - Long-lived Assets

Flashcards covering key vocabulary and concepts related to long-lived assets, their classification, depreciation methods, and financial reporting.

Long-lived Assets

Assets that have a useful life of more than one year and are used in the operations of a business.

Tangible Assets

Long term assets which have a physical substance, including land, buildings, equipment, and vehicles.

Intangible Assets

Long term assets that have no physical substance but have value based on rights or privileges they provide.

Natural Resources

Long term assets purchased for their economic value that can be taken from the land, such as mines and oil fields.

Depreciation

The process of allocating to expense the cost of a plant asset over its useful life in a systematic manner.

Straight-Line Method

A depreciation method that expenses the same amount of depreciation for each year of the asset's useful life.

Units of Activity Method

A depreciation method that expenses depreciation based on the use of the asset during a particular period.

Double Declining Balance Method

An accelerated depreciation method that provides a higher expense in the early years of an asset's life.

Residual Value

The estimated value of an asset at the end of its useful life.

Acquisition Cost

The total cost incurred to acquire an asset and prepare it for its intended use.

Capitalized Expenditures

Expenditures that improve the capacity or efficiency of an asset and are added to the asset's cost.

Accrued Depreciation

The cumulative amount of depreciation that has been recognized on an asset.

Matching Principle

An accounting principle that matches expenses with revenues earned in the same period.

Balance Sheet

A financial statement that reports a company's assets, liabilities, and equity at a specific point in time.

Investment

Assets not used in the normal course of business that are held for potential profit.

Plant Assets

Long-lived assets used in the production of goods and services, such as machinery and buildings.

Book Value

The value of an asset as recorded on the balance sheet, calculated by subtracting accumulated depreciation from its cost.

Gains and Losses on Disposal

Results of selling an asset, which can be classified as gains if cash received is greater than book value or losses otherwise.

Depreciable Assets

Assets subject to depreciation, excluding land which is not depreciated.

Capitalization Rule

A rule determining whether an expenditure should be added to an asset's cost or expensed.

Histroricl Cost Principle

•PLANT ASSETS are recorded and carried on the Balance Sheet at COST !

 Historical Cost Principle

Acquisition cost includes the purchase price and all expenditures incurred to prepare and bring the asset for its intended purpose and use.