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ACC 201 Chapter 8
Vocabulary
27
Accounting
Undergraduate 2
11/07/2011

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Term
Tangible assets
Definition
things that have physical substance including fixed assets.
Term
Three types of tangible assets
Definition
land
building
natural resources
Term
cost principle
Definition
all reasonable and necessary expenditures made in acquiring and preparing an assets for use should be recorded as the cost of the asset.
Term
capitalized
Definition
expenditures that are recorded as part of the cost of an asset
Term
intangible
Definition
have special rights but not physical substance
Term
long-lived assets
Definition
tangible and intangible resources owned by a business and used in its operations over several years.
Term
fixed asset turnover=
Definition
=net sales (or operating revenues) / avg net fixed assets
Term
acquisition cost
Definition
the net cash equivalent amount paid or to be paid for the asset
Term
cash equivalent price
Definition
the fair value of the assets given or assets received
Term
fair value
Definition
assets at their current value
Term
ordinary repairs and maintenance
Definition
expenditures for normal operating upkeep of long-lived assets
Term
revenue expenditures
Definition
maintain the productive capacity of the asset during the current accounting period only and are recorded as expenses
Term
additions and improvements
Definition
infrequent expenditures that increase an assets economic usefulness in the future
Term
capital expenses
Definition
increase the productive life operating efficiency or capacity of the assets and are recorded as increases in asset accounts not as expenses
Term
depreciation
Definition
the process of allocating the cost of buildings and equipment over their productive lives using a systematic and rational method
Term
depreciation
Definition
the process of allocating the cost of buildings and equipment over their productive lives using a systematic and rational method
Term
accumulated depreciation
Definition
amount of depreciation expense since the acquisition date is reported on the balance sheet as a contra-account
Term
Depreciation Expense
Definition
amount of depreciation recorded during each period and is reported on the income statement
Term
cost allocation
Definition
determining an asset's current market value or worth based on its depreciation
Term
matching principle (with depreciation)
Definition
requires that a portion of an asset's cost be allocated as an expense in the same period that revenues are generated by its use.
Term
net book value=
Definition
=cost - accumulated depreciation (reported on balance sheet)
Term
estimated useful life
Definition
the expected service life of an asset to the present owner
Term
residual value
Definition
also known as the a salvage value, the estimated amount to be recovered by the company at the end of an assets estimated useful life
Term
straight line depreciation
Definition
an equal proportion of an asset's depreciable cost is allocated to each accounting period over its useful life
Term
straight line formula
Definition
(cost - residual value) x (1/useful life) = depreciation expense
Term
depreciation schedule
Definition
amount of depreciation expense each year over the entire useful life of the machine
Term
units of production depreciation
Definition
allocates the cost of an asset over its useful life based on the relation of its periodic output to its total estimated output
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