- accumulated depletion
- contra account that records the total depletion expense for a natural resource over its life
- accumulated depreciation
- contra account that records the total depreciation expense for a fixed asset over its life
- amortization
- allocation of the costs of intangible assets over their useful economic lives; also, process of separating the principal and interest in loan payments over the life of a loan
- capitalization
- process in which a long-term asset is recorded on the balance sheet and its allocated costs are expensed on the income statement over the asset’s economic life
- contra account
- account paired with another account type, has an opposite normal balance to the paired account, and reduces the balance in the paired account at the end of a period
- copyright
- exclusive rights to reproduce and sell an artistic, literary, or musical asset
- current expense
- cost to the business that is charged in the current period
- depletion
- expense associated with consuming a natural resource
- depreciation
- process of allocating the costs of a tangible asset over the asset’s economic life
- double-declining-balance depreciation method
- accelerated depreciation method that accounts for both time and usage, so it takes more expense in the first few years of the asset’s life
- fixed asset
- tangible long-term asset
- functional obsolescence
- reduction of an asset’s value to the company, not including physical obsolescence
- goodwill
- value of certain favorable factors that a business possesses that allows it to generate a greater rate of return or profit; includes price paid for an acquired company above the fair value of its identifiable net assets
- intangible asset
- asset with financial value but no physical presence; examples include copyrights, patents, goodwill, and trademarks
- investment
- short-term and long-term asset that is not used in the day-to-day operations of the business
- long-term asset
- asset used ongoing in the normal course of business for more than one year that is not intended to be resold
- natural resources
- assets a company owns that are consumed when used; they are typically taken out of the earth
- patent
- contract providing exclusive rights to produce and sell a unique product without competition for twenty years
- physical obsolescence
- reduction in the value of an asset to the company based on its physical deterioration
- salvage (residual) value
- price that the asset will sell for or be worth as a trade-in when the useful life is over
- straight-line depreciation
- depreciation method that evenly splits the depreciable amount across the useful life of the asset
- tangible asset
- asset that has physical substance
- trademark
- exclusive right to a name, term, or symbol a company uses to identify itself or its products
- units-of-production depreciation method
- depreciation method that considers the actual usage of the asset to determine the depreciation expense
- useful life
- time period over which an asset cost is allocated