Accounting Ch 10+11 vocab

warranty

Agreement that obligates the seller to correct or replace a product or service when it fails to perform properly within a specified period. A seller's obligation to replace or repair a product that does not perform as expected.

book value

Asset's acquisition costs less its accumulated depreciation (or depletion, or amortization); also sometimes used synonymously as the carrying value of an account. Original Cost - Accumulated Depreciation

short-term note payable

Current obligation in the form of a written promissory note. A written promise to pay a specified amount of money on a stated due date that is within the next 12 months.

salvage value

Estimate of amount to be recovered at the end of an asset's useful life; also called residual value or scrap value. An estimate of an asset's value at the end of its useful life.

betterments

Expenditures to make a plant asset more efficient or productive; also called improvements. Expenditures that make a plant asset more efficient or productive.

Depreciation

Expense created by allocating the cost of plant and equipment to periods in which they are used; represents the expense of using the asset. The process of spreading a plant asset over its useful life.

net pay

Gross pay less all deductions; also called take-home pay. Employee compensation minus all FICA, Federal and state taxes.

useful life

Length of time an asset will be productively used in the operations of a business; also called service life or limited life. The length of time an asset will be used to help a business generate revenue.

intangible assets

Long-term assets used to produce or sell products or services; usually lack physical form and have uncertain benefits. Assets used to generate revenue, lacking in physical form and giving the company long-term rights or competitive advantages.

straight line depreciation

Method that allocates an equal portion of the depreciable cost of plant asset (cost minus salvage) to each accounting period in its useful life. A depreciation method that spreads an asset's cost evenly over its useful life.

units-of-production

Method that charges a varying amount to depreciation expense for each period of an asset's useful life depending on its usage. A depreciation method that varies the amount of depreciation expense depending on an asset's usage.

contingent liability

Obligation to make a future payment if, and only if, an uncertain future event occurs. A potential liability that depends on the outcome of a future event due arising from something occurred in the past (ex: lawsuit)

current liabilities

Obligations due to be paid or settled within one year or the company's operating cycle, whichever is longer. Obligations with due dates within the next 12 months.

long-term liability

Obligations not due to be paid within one year or the operating cycle, whichever is longer. Debts with due dates beyond the next 12 months.

known liabilities

Obligations of a company with little uncertainty; set by agreements, contracts, or laws; also called definitely determinable liabilities. Measurable liabilities that are due to agreements, contracts or laws.

Amortization

Process of allocating the cost of an intangible asset to expense over its estimated useful life. The process of spreading the cost of an intangible asset over its useful life.

depletion

Process of allocating the cost of natural resources to periods when they are consumed and sold. The process of spreading the cost of a natural resource over its useful life.

ordinary repairs

Repairs to keep a plant asset in normal, good operating condition; treated as a revenue expenditure and immediately expensed. Expenditures required to keep an asset in normal operating condition.

sales tax payable

Sales tax collected from customers by the seller, representing current liabilities payable to the government Taxes collected from a customer by the retailer when merchandise or services are sold.

plant assets

Tangible long-lived assets used to produce or sell products and services; also called property, plant and equipment (PP&E) or fixed assets. Assets used to generate revenue that have a tangible form and a useful life of more than one accounting period.

warranty expense

The expense account used to record the estimated warranty costs associated with a sale.

gross pay

Total compensation earned by an employee. Total compensation earned by an employee before deductions for FICA, Federal and state income taxes.

natural resources

assets physically consumed when used; examples are timber, mineral deposits, and oil and gas fields; aka wasting assets Assets that are physically consumed when used to generate revenue.

declining balance method

determines depreciation charge for the period by multiplying a depreciation rate (often twice the straight-line rate) by the asset's beginning period book value. An accelerated depreciation method.

FUTA (Federal Unemployment Tax Act)

federal unemployment tax act- employers pay federal unemployment tax on wages and salaries earned by their employees Employer taxes paid to the federal government to support unemployment benefits.

estimated warranty liability

obligation of an uncertain amount that can be reasonably estimated. The liability account used to record estimated warranty costs related to a sale.

lump-sum purchase

plant assets are purchased as a group in a single transaction for lump-sum price. Several plant assets purchased as a group in a single transaction for a single price.

current portion of long-term debts

portion of long-term debt due within one year or the operating cycle, whichever is longer. reported under current liabilities That part of a long-term obligation that is due within the next 12 months.

SUTA (State Unemployment Tax Act)

state unemployment tax act- all states fund unemployment insurance programs with payroll tax on employers Employer taxes paid to states to fund their unemployment insurance programs.

FICA Taxes (Federal Insurance Contributions Act)

taxes assessed on both employers and employees; for social security and Medicare programs. Taxes that include Social Security and Medicare withholdings.