Regional Accounting Concept #1 (Depreciation & Plant Assets)

Depreciation

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

Plant Assets

Long-lived assets used in the operations of a business, such as equipment and buildings.

Historical Cost

The original monetary value of an asset recorded on the balance sheet, including purchase price and associated costs.

Current Assets

Assets that are expected to be converted to cash within one year.

Salvage Value

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

Accumulated Depreciation

A contra-asset account that reflects the total depreciation expense allocated to an asset over its useful life.

Straight-Line Depreciation

A method of allocating equal annual depreciation expense over an asset's useful life.

Double-Declining Balance

An accelerated depreciation method that expenses more in the earlier years of an asset's life.

Units of Production Method

A depreciation method that allocates expense based on the asset's usage.

Book Value

The value of an asset after accounting for accumulated depreciation.

Contra-Asset Account

An account that reduces the value of a related asset account, such as accumulated depreciation.

Matching Principle

An accounting principle that states expenses should be matched with revenues in the period in which they are incurred.

Obsolescence

A reduction in the usefulness of an asset due to advances in technology or changes in market conditions.

Cost of Asset

Total expenditures incurred to acquire an asset and prepare it for use.

Useful Life

The estimated period over which an asset will be used for productive purposes.

Gain on Sale of Asset

An increase in the company's income resulting from selling an asset for more than its book value.

Loss on Sale of Asset

A decrease in the company's income resulting from selling an asset for less than its book value.

Plant & Equipment

Assets that include physical items used in business operations, such as machinery and vehicles.

Disposal Value

The amount expected to be received upon selling an asset at the end of its useful life.

Real Assets

Tangible assets such as land and buildings, as opposed to financial assets.

Liquid Assets

Assets that can be quickly converted into cash.