Chapter#4B: Depreciation and Amortization Flashcards Preview

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Flashcards in Chapter#4B: Depreciation and Amortization Deck (11)
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1

What is Depreciation?

to record the systematic write-off of the cost of a tangible capital asset

2

What is Amortization?

it's used to write-off the cost of a intangible capital asset

3

Whats the Purpose of Depreciation and Amortization?

it's to charge a portion of the cost of the capital asset against the revenue

4

True or False; Depreciation and Amortization are not calculated the same way?

False, they are.

5

What are the 2 ways of calculating depreciation?

Straight line and Declining balance

6

What is Straight-Line Depreciation?

it's a method of writing off the cost of capital assets

7

What is Residual Value?

it represents the expected value of the asset at the end of it's useful life to the business

8

What is the Declining Balance method?

it's an accelerated depreciation method

9

What is an accelerated depreciation method?

it calculates more depreciation in the early years and less in the later years.

10

how is Depreciation calculated

it's calculated on the remaining underappreciated cost of the asset each year

11

How is the Net Book Value calculated?

By subtracting the accumulated depreciation recorded on the asset from the original cost of the asset