Term
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Definition
| amount due from another party |
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Term
| 2 most common recievables |
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Definition
| accounts receivable & tax refund receivable |
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Term
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Definition
amounts due from customers for credit sales.
t includes receivables that occur when customers use credit cards issued by third parties and when a company gives credit directly to customers. When a company does extend credit directly to customers, it (1) maintains a separate account receivable for each customer and (2) accounts for bad debts from credit sales. |
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Term
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Definition
| credit sales are recorded y increasing (debiting) accounts receivable |
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Term
| internet credit sales & effects |
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Definition
| Web merchants pay twice as much in credit card association fees as other retailers because they suffer 10 times as much fraud. |
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Term
| credit card periodic payments |
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Definition
| allow their credit customers to make periodic payments over several months. The seller refers to such assets as installment accounts (or finance) receivable, which are amounts owed by customers from credit sales for which payment is required in periodic amounts over an extended time period. The customer usually is charged interest |
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Term
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Definition
| when a credit charge made by a customer isn't paid. the accounts of these customers are uncollectable accounts. |
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Term
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Definition
angible assets used in the operation of a business that have a useful life of more than one accounting period
**Note- Point: It can help to view plant assets as prepaid expenses that benefit several future accounting periods. |
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Term
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Definition
| also called residual value or scrap value, is an estimate of the asset's value at the end of its benefit period. This is the amount the owner expects to receive from disposing of the asset at the end of its benefit period. If the asset is expected to be traded in on a new asset, its salvage value is the expected trade-in value.s Useful life and salvage value are estimates. Estimates require judgment based on all available information. |
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Term
| straight line depriciation |
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Definition
| charges the same amount of expense to each period of the asset's useful life. A two-step process is used. We first compute the depreciable cost of the asset, also called the cost to be depreciated. It is computed by subtracting the asset's salvage value from its total cost. Second, depreciable cost is divided by the number of accounting periods in the asset's useful life. The formula for straight-line depreciation, along with its computation for the inspection machine just described, is shown in |
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Term
| many companies use accelerated depreciation in computing taxable income because |
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Definition
| using it causes a company to use higher income in the early years of the assets useful life. |
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Term
| accelerated depreciation method |
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Definition
| yields larger depreciation expenses in the early years of an assets life and less depreceiation in the later years |
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Term
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Definition
| most common used acclerated method, uses a depreciation rate that is a multiple of the straight line rate and applies it to the assets beginning of a period book value. amount of dep. declines each period bc book value declines each period |
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Term
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Definition
assets that increase the usefulness of land, but that have a limited useful life and are subject to depreciation
**Land improvements such as parking lot surfaces, driveways, fences, shrubs, and lighting systems, however, have limited useful lives and are used up. While the costs of these improvements increase the usefulness of the land, they are charged to a separate Land Improvement account so that their costs can be allocated to the periods they benefit. |
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Term
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Definition
| the total cost of an asset less its accumulated depreciation |
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Term
| Units of production method |
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Definition
A company purchased a rope braiding machine for $190,000. The machine has a useful life of 8 years and a residual value of $10,000. It is estimated that the machine could produce 750,000 units of climbing rope over its useful life. In the first year, 105,000 units were produced. In the second year, production increased to 109,000 units. Using the units-of-production method, what is the amount of depreciation that should be recorded for the second year?
($190000/750000 * 109000) |
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Term
| accumulated depreciation example |
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Definition
| A company sold a machine that originally cost $100,000 for $60,000 cash. The accumulated depreciation on the machine was $40,000. The company should recognize a: (A) $0 gain or loss |
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Term
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Definition
a probable future payment of assets or services that a company is presently obligated to make as a result of past transactions or events. This definition includes three crucial factors:
A past transaction or event.
A present obligation.
A future payment of assets or services. |
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Term
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Definition
also called short-term liabilities, are obligations due within one year or the company's operating cycle, whichever is longer. They are expected to be paid using current assets or by creating other current liabilities. Common examples of current liabilities are accounts payable, short-term notes payable, wages payable, warranty liabilities, lease liabilities, taxes payable, and unearned revenues.
Point: Improper classification of liabilities can distort ratios used in financial statement analysis and business decisions. |
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