Accounting for Plant Assets, Liabilities, and Depreciation

These flashcards cover key concepts related to accounting for plant assets, liabilities, depreciation methods, and the treatment of contingent liabilities and intangibles.

Cost of Plant Assets

The total of all costs incurred to bring the asset to its intended use, including purchase price, taxes, and commissions.

Depreciation

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

Capital Expenditure

An expense that increases an asset's capacity or extends its useful life.

Immediate Expense

An expense that maintains or restores an asset to working order without extending its useful life.

Amortization

The process of gradually writing off the initial cost of an asset over a period of time.

Lump-Sum Purchase

Buying multiple fixed assets as a group for a single lump-sum amount.

Relative-Sales-Value Method

A method to allocate a lump-sum purchase cost among individual assets based on their market values.

Leasehold Improvements

Customizations made to leased assets that are depreciated over the shorter of their useful life or the lease term.

Double-Declining Balance Method

An accelerated depreciation method that calculates depreciation by multiplying the asset's declining book value by a constant percentage.

Book Value

The value of an asset calculated as its cost minus accumulated depreciation.

Fully Depreciated Asset

An asset that has reached the end of its estimated useful life and no further depreciation is recorded.

Natural Resources

Long-term physical assets that are depleted over time, such as oil and timber, accounted for differently than plant assets.

Intangible Assets

Long-term assets without physical form, including patents, copyrights, and goodwill.

Deferred Tax Liability

Taxes accrued but not yet paid, arising from temporary differences between accounting income and taxable income.

Times-Interest-Earned Ratio

A measure of a company's ability to meet its interest obligations, calculated by dividing operating income by interest expense.

Current Portion of Long-Term Debt

The portion of long-term liabilities that is due within the next year.

Accrued Liabilities

Expenses that have been incurred but not yet paid, such as wages or taxes.

Contingent Liabilities

Potential obligations that depend on future events, such as lawsuits or warranty claims.

Robotic Process Automation (RPA)

Technology that uses software bots to automate repetitive tasks in processes like accounts payable.