Accounting Principles - Plant Assets, Natural Resources, and Intangible Assets

Flashcards focusing on key vocabulary and concepts related to plant assets, natural resources, and intangible assets from accounting principles.

Plant Assets

Resources that have physical substance, are used in business operations, not intended for sale, and expected to be useful for several years.

Historical Cost Principle

Requires companies to record plant assets at cost, including all expenditures necessary to bring the asset to its intended use.

Land Improvements

Structural additions made to land that have limited useful lives and are depreciated over their useful lives.

Depreciation

The process of allocating the cost of a plant asset to expense over its useful life in a rational and systematic manner.

Straight-Line Method

A depreciation method where the same amount is expensed each year over the asset's useful life.

Units-of-Activity Method

A depreciation approach based on the estimated total units of activity to calculate cost per unit.

Declining-Balance Method

An accelerated depreciation method that decreases the annual depreciation expense over the asset's useful life.

Natural Resources

Resources that are physically extracted and replaceable only by an act of nature, such as oil, gas, coal, and minerals.

Depletion

The process of allocating the cost of natural resources to expense over their useful life in a systematic manner.

Intangible Assets

Rights, privileges, and competitive advantages resulting from ownership of long-life assets without physical substance.

Amortization

The process of gradually writing off the initial cost of an intangible asset over its useful life.

Goodwill

An intangible asset recorded when a company purchases another business, representing the excess of purchase price over fair value of acquired net assets.

Accumulated Depreciation

The total depreciation expense that has been allocated to an asset over time.

Gain on Disposal

The occurrence of a gain when the proceeds from the sale of an asset exceed its book value.

Loss on Disposal

The occurrence of a loss when the proceeds from the sale of an asset are less than its book value.

Capital Expenditures

Costs incurred to acquire or substantially improve plant assets, which are capitalized.

Revenue Expenditures

Costs incurred for ordinary repairs and maintenance to keep an asset in working condition, expensed as incurred.

Research and Development Costs

Expenditures that may lead to patents or new products, which are expensed when incurred.

Property, Plant, and Equipment

A category on the balance sheet combining plant assets and natural resources.

Component Depreciation

An IFRS requirement that significant parts of a depreciable asset with different useful lives be separately depreciated.