To pass this unit, please study the 15 vocabulary words below.
- accelerated depreciation
- accrual accounting
- allocate
- amortization
- annuity depreciation
- carry over
- cash-flow
- determined by
- divide
- finite life
- multiply
- net-book value
- salvage value
- straight line depreciation
- sum-of-years-digits depreciation
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a term used to show that the reduction of an asset's value happens faster at the start of its useful life than at the end
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"Assets like vehicles lose a lot of value in the first year of their life, which is why accelerated depreciation is such a useful tool."
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an accounting method that measures the performance and position of a company by recognizing economic events regardless of when cash transactions occur
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"The accountant advised to operate an accrual accounting system for the small start-up, as he said it gave a more accurate picture of the true financial state."
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distribute according to an existing plan
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"After studying the budget, it was clear that the marketing department had been allocated more than was needed."
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the deduction of capital expenses incurred on an intangible asset over a specific period of time
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"The accounts department started the amortization process as soon as the purchase of the licenses was finalized."
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a method of depreciation centred around cost recovery and a constant rate of return upon any asset that is being depreciated
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"Most production machinery is depreciated using annuity depreciation as it allows the calculation of a per unit produced cost for the asset."
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transfer a sum relating to one account to a new column, page, year
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"When preparing the accounts for each year, you must remember to carry over the balances from the previous year’s depreciation account."
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the movement of money into and out of a company, firm or legal entity
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"When you apply for a bank loan, you will need to provide cash-flow records showing your current financial situation."
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decided by or because of
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"Our decision to stop production was determined by poor sales over the past year."
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split into equal parts or groups
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"If you want to know your hourly salary, divide your weekly wage by the number of hours you work."
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a lifespan which is limited to a certain number of years, months, weeks or days
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"Most assets have a finite life, as eventually they will break or need to be replaced."
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increase the number of by the power of x
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"If you multiply two by three, you'll get six. "
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the current value of an asset shown in the accounting documents
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"The car was purchased for $30,000, now only one year later the net-book value is $22,000, which shows a depreciation rate of $8,000 in year one."
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the amount of money that an asset will be worth at the end of its useful life
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"The company purchased a $16,000 forklift for use in its warehouse and believes it'll be able to resell the forklift for a salvage value of $1,000 at the end of 8 years."
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the method for reducing the value of a tangible asset by equal amounts over its useful life
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"Not having much experience in accounting, he chose the straight line method of depreciation as it appeared to be the easiest to understand."
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the method for reducing the value of a tangible asset by a variable percentage depending on how long the asset has been on the books
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"A lot of people are put off by the sum-of-years-digits method of depreciation, as it can seem complicated, but it does have some advantages."