Introduction to Financial Accounting

A collection of vocabulary flashcards covering key concepts related to asset acquisition, depreciation methods, intangible assets, and asset disposal in financial accounting.

Capitalization of expenditures

The process of recording expenditures that improve the value of an asset on the balance sheet.

Depreciation

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

Straight-line depreciation

A method of depreciating an asset evenly over its useful life.

Double declining balance depreciation

A method that accelerates depreciation by applying double the straight-line rate.

Units of production depreciation

A method of depreciation based on the asset's usage, activity, or units produced.

Amortization

The gradual reduction of a debt or the writing off of an intangible asset over time.

Goodwill

An intangible asset that arises when a company acquires another for more than its fair value.

Asset disposal process

The steps to record the disposal of an asset, including updating depreciation, removing asset costs, recording proceeds, and recognizing gains or losses.

Net book value

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

Residual value

The estimated value that an asset will realize upon its sale at the end of its useful life.