Depreciation: Declining Balance definitions Flashcards
Depreciation: Declining Balance definitions
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Double Declining Balance Method An accelerated approach allocating more depreciation to early years by applying twice the straight-line rate to the asset's book value. Depreciation Expense The annual allocation of an asset's cost, reducing net income and taxable income, especially higher in early years with accelerated methods. Fixed Asset A long-term tangible resource acquired for business use, expected to provide benefits over multiple years. Useful Life The estimated period an asset is expected to contribute to revenue generation for a company. Residual Value The anticipated worth of an asset at the end of its useful life, also known as salvage or scrap value. Depreciation Rate A percentage calculated as twice the reciprocal of useful life, used annually to determine depreciation under the double declining balance method. Net Book Value The asset's cost minus accumulated depreciation, serving as the base for annual depreciation calculations. Accelerated Depreciation A method that allocates higher depreciation expenses in the early years and lower amounts in later years of an asset's life. Depreciable Base The total amount of an asset's cost subject to depreciation over its useful life. Plug A final adjustment in the last year of depreciation to ensure the asset's book value matches its residual value. Straight-Line Depreciation A method allocating equal depreciation expense each year, subtracting residual value at the start. Tax Benefit A reduction in taxable income resulting from higher early-year depreciation expenses. Salvage Value An alternative term for residual value, representing expected asset worth after use. Scrap Value Another synonym for residual value, indicating the estimated end-of-life value of an asset.
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