Depreciation Accounting

These flashcards cover key concepts in depreciation accounting, non-current assets, and the implications of capital versus revenue expenditure.

Depreciation

The portion of the cost of a non-current asset that is consumed during its period of use by the business, charged to profit or loss.

Non-Current Assets

Assets that are expected to be used in business operations for more than one accounting period, such as machinery or buildings.

Revenue Expenditure

Expenses that are set against the revenue produced by the business during a specific period.

Capital Expenditure

Expenditures used to acquire or improve long-term assets which will benefit the business over multiple accounting periods.

Tangible Non-Current Assets

Physical assets that can be touched, such as machinery and buildings, held for production or supply of goods and services.

Asset Register

A detailed record of individual assets, including information such as purchase, location, depreciation, and disposal data.

Straight-Line Depreciation

A method of depreciation where the asset's cost is evenly spread over its useful life.

Reducing Balance Method

A depreciation method where larger depreciation charges are applied in the early years of an asset's useful life.

Useful Life

The estimated time period that a business intends to use a non-current asset profitably.

Residual Value

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

Accumulated Depreciation

The total amount of depreciation expense allocated to an asset since it was acquired.

Depletion

The reduction in the value of natural resources through extraction over time.