DEPRECIATION Flashcards
decrease in value of physical properties with time and use
Depreciation
noncash cost to “match the yearly fraction of value used by an asset in the production of income over the asset’s life
Depreciation
types of depreciation
internal and external
occuers for normal causes like wear and tear and depletion
internal
caused by external causes obsolescence and efflux of time and accident
external
property for which depreciation is allowed under federal, municipal
Depreciation property
machinery, vehicle, equipment, are example sof ___ property
personal
land and anything attached to is an example of ___ property
real p
types of depreceiation property
tangible, intangible
two types of tangible prop
real, personal
original cost basis, adjusted in increase and decreasweq
adjusted cost basis
initial cost of acquiring an asset
basis or cost basis
original cost baiss of the property
book value
amount that will be paid by a willing buyee to a seller for a property
market value (MV)
number of years over which property is recovered
recovery period
estimated value of property at the end of its useful life
salvage value (SV)
estimated period thatr a property will be used to produce income. It is how long the owner expects to productively use it
useful life
annual cost of depreciation is in a fixed percentage of BV
declining balance method
simplest depreciation method
straight-line method
Decrease in value is a function of use of machines
units of production method
decrease in the value of wasting assets
depletion method
assets whose value gradually reducesin the account of use and exhusts completely
wasting assets
Charge of depreciation is based on
total amount paid, total estimated quslity of output available.
assessed as a function of gross revenue –allowable deductions
Income tax
assessed as a function of the value of property owned (land, building, equipment) and the applicable tax rates.
Property tax
assessed on the basis of purchases of goods and service (levied by state, municipal or country government) and thus independent of gross income or profit.
Sales tax
federal taxes assessed as a function of the sale of certain goods or services considered non-necessities and are hence independent of the income or profit of a business.
Excise tax
