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