Chapter 8 Review: Accounting Principles

These flashcards cover key concepts from Chapter 8 on accounting principles related to accounts receivable, asset capitalization, and depreciation, helping to reinforce understanding for the exam.

Accounts Receivable

Money owed to a company by its customers for goods or services sold on credit.

Direct Write-Off Method

An accounting approach where accounts receivable are written off as bad debt when they are deemed uncollectible.

Allowance Method

An accounting method that estimates uncollectible accounts receivable and records it as an expense to match revenues.

Matching Principle

An accounting principle that prescribes expenses must be matched with revenues in the period when the revenue was earned.

Fixed Asset

A long-term tangible asset used in the operations of a business, such as equipment or buildings.

Cost to Capitalize

All costs necessary to prepare an asset for its intended use, including installation and transportation.

Demolition Costs

Expenses incurred in tearing down a structure that are included in the total cost of the land.

Book Value

The value of an asset after accounting for depreciation, calculated as the original cost minus accumulated depreciation.

Depreciation

The systematic allocation of the cost of a tangible asset over its useful life.

Capital Lease

A lease that transfers substantially all risks and rewards of ownership to the lessee.

Right to Use Asset

An asset representing a lessee's right to use an underlying asset for the lease term.

Maturity Value

The amount due at the end of a financial obligation, including principal and interest.

W-4 Form

A form used by employees to indicate their tax situation to their employer for withholding purposes.

Payroll Tax Expense

The amount an employer must pay in taxes based on employees' wages, including Social Security and Medicare.

Journal Entries

Records of financial transactions in the accounting books.

Internal Entries

Adjustments made within an organization's accounting records.