Property-Plant-Equipment Depreciation Methods

Flashcards covering key concepts related to Property-Plant-Equipment and comparison of depreciation methods.

Straight-Line Depreciation

A method that allocates equal depreciation expense over the useful life of an asset, showing a smaller amount in the first year.

Accelerated Depreciation

A method that allows larger depreciation expenses in the earlier years of an asset's life, resulting in a higher expense in the first year.

Net Income

Total revenue minus total expenses, showing the profitability of a business.

Accumulated Depreciation

The total amount of depreciation expense that has been allocated to an asset over its useful life, classified as a contra asset.

Tax Advantage

The benefit that results from reducing taxable income by increasing depreciation expense.

Financial Statement Impact

The effect of different depreciation methods on balance sheets and income statements, influencing net income and total assets.

Contra Asset

An asset account that is offset by another account, reducing the total value of assets on the balance sheet.

Last Year of Depreciation

The final year an asset is depreciated, where acceleration in expense recordings affects net income differently than in the first year.

Comparison of Methods

Analyzing different depreciation methods to determine their effects on financial reporting items such as net income and total assets.

Depreciation Expense

The amount allocated to account for the reduction in value of an asset over time due to use, wear and tear, or obsolescence.