Unit 7: Vocabulary

Please study the 15 vocabulary terms below. Then press the Mark Complete button to continue.
US
UK
accelerated depreciation
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
US
UK
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.
US
UK
accrual accounting
an accounting method that measures the performance and position of a company by recognizing economic events regardless of when cash transactions occu
US
UK
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.
US
UK
allocate
distribute according to an existing plan
US
UK
After studying the budget, it was clear that the marketing department had been allocated more than was needed.
US
UK
amortization
the deduction of capital expenses incurred on an intangible asset over a specific period of time
US
UK
The accounts department started the amortization process as soon as the purchase of the licenses was finalized.
US
UK
annuity depreciation
a method of depreciation centred around cost recovery and a constant rate of return upon any asset that is being depreciated
US
UK
Most production machinery is depreciated using annuity depreciation as it allows the calculation of a per unit produced cost for the asset.
US
UK
carry over
transfer a sum relating to one account to a new column, page, yea
US
UK
When preparing the accounts for each year, you must remember to carry over the balances from the previous year’s depreciation account.
US
UK
cash-flow
the movement of money into and out of a company, firm or legal entity
US
UK
When you apply for a bank loan, you will need to provide cash-flow records showing your current financial situation.
US
UK
determined by
decided by or because of
US
UK
Our decision to stop production was determined by poor sales over the past year.
US
UK
divide
split into equal parts or groups
US
UK
If you want to know your hourly salary, divide your weekly wage by the number of hours you work.
US
UK
finite life
a lifespan which is limited to a certain number of years, months, weeks or days
US
UK
Most assets have a finite life, as eventually they will break or need to be replaced.
US
UK
multiply
increase the number of by the power of x
US
UK
If you multiply two by three, you'll get six. 
US
UK
net-book value
the current value of an asset shown in the accounting documents
US
UK
The car was purchased in 2011 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 1.
US
UK
salvage value
the amount of money that an asset will be worth at the end of its useful life
US
UK
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.
US
UK
straight line depreciation
the method for reducing the value of a tangible asset by equal amounts over its useful life
US
UK
Not having much experience in accounting, he chose the straight line method of depreciation as it appeared to be the easiest to understand.
US
UK
sum-of-years-digits depreciation
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
US
UK
A lot of people are put off of the sum-of-years-digits method of depreciation as it can seem complicated, but it does have some advantages.
Go to unit menu