Chapter 16 Vocab
depreciation
instead a method called Depreciation is used to spread the cost of the assets over the length of its useful life, which is measured in years.
sum-of-the-years'-digits method
the Sum Of The Years Digit method of depreciation is another accelerated depreciation method.
200% method
the following examples of declining-balance depreciation show the 200% Method, or double-declining balance method.
modified accelerated cost recovery system (MACRS)
the most recent method is known as the Method Accelerated Cost Recovery System (MARCS)
straight-line method
the simplest method of depreciation, Straight Line depreciation, assumes that assets lose an equal amount value during each year of life.
depreciation fraction
the use of the sum of the years digits method requires a Depreciation Fraction instead of the depreciation rate used earlier.
recovery periods
these lives, or Recovery Periods, are determined as followed.
half year convention
this is known as the half year convention and is used by most taxpayers.
useful life
useful Life is the period of time during which the asset will be used.
units-of-production method
with these assets, the Units Of Production Method of depreciation is used.
partial-year depreciation
this Partial Year Depreciation is explained in the following examples.
accelerated depreciation
Accelerated Depreciation produces larger amounts of depreciation in the earlier years of the life of an asset and smaller amounts in the later years.
accumulated depreciation
Accumulated depreciation is the amount of depreciation taken so far, a running balance of depreciation to date.
intangible assets
An asset that is not physical in nature. Corporate intellectual property (items such as patents, trademarks, copyrights, business methodologies), goodwill and brand recognition are all common Intangible Assets in today's marketplace.
book value
Book value is the cost of an asset minus the total depreciation to date.
cost
Cost is the basis for determining depreciation. it is the total amount paid for the asset.
salvage value or scrap value
Salvage value or scrap value is the estimated value of an asset when it is retired from service, traded in, deposed of, or exhausted.
double-declining balance method
The Double Declining Balance depreciation Method is an accelerated depreciation method that counts twice as much of the asset's book value each year as an expense compared to straight-line depreciation.
no salvage value
an asset may have a salvage value of zero or No salvage value
depreciation schedule
a Depreciation Schedule is often used to show the annual depreciation, accumulated depreciation, and book value over the useful life of an asset.
publication 534
a complete coverage of depreciation including all depreciation tables is included in interal revenue service Publication 534.
accelerated cost recovery system (ACRS)
a depreciation method known as the Accelerated Cost Recovery System (ACRS) originated as part of the economic recovery tax act of 1981
depreciable amount
find the amount to be depreciated (depreciated amount) using the following formula
income tax method
first, the system is designed, really, for tax purpose, and businesses often use some alternate method of depreciation for financial accounting purposes.
declining balance method
one of the more common accelerated methods of depreciation is the Declining-Balance Method.
tangible assets
physical assets such as machinery, cars, or buildings are Tangible Assets.
residual value
salvage value or scrap value, sometimes called Residual Value