Accounting Principles Review

These flashcards cover essential accounting principles, including definitions of key terms related to assets, liabilities, equity, and methods of depreciation.

Assets

What a company owns.

Liabilities

What a company owes.

Equity

The residual interest in the assets of the entity after deducting liabilities.

Depreciation

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

Current Liabilities

Liabilities that are due within one year.

Long-term Liabilities

Liabilities that are not due within one year.

Profitability

A measure of a company's ability to generate earnings relative to its revenue, assets, or equity.

Asset Valuation

The process of determining the current worth of an asset.

Revenue Recognition Principle

The principle that revenues are recognized when they are earned, regardless of when cash is received.

Straight-Line Method

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

Declining-Balance Method

A method of depreciation that accelerates the expense recognition in earlier years.

Units of Production Method

A method of depreciation based on the asset's usage.