Initial Cost of Long Lived Assets definitions Flashcards
Initial Cost of Long Lived Assets definitions
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Long-lived Assets Resources expected to provide economic benefits for multiple years, including land, land improvements, buildings, and machinery. Property, Plant, and Equipment A balance sheet category encompassing tangible long-term assets used in business operations, often abbreviated as PPE. Historical Cost Principle Accounting guideline requiring assets to be recorded at the original purchase price plus necessary expenditures, not adjusted for market changes. Land A non-depreciable fixed asset representing the ground owned by a business, excluding any structures or improvements. Land Improvements Additions to land such as fences, parking lots, or lighting, which have limited useful lives and are subject to depreciation. Leasehold Improvements Alterations made to leased property by the lessee, depreciated over the shorter of the lease term or the improvement's useful life. Buildings Structures owned by a business, recorded at cost including purchase price and necessary expenditures, and depreciated over their useful lives. Machinery Tangible assets like equipment used in production, capitalized at all costs to make them operational, and depreciated over time. Depreciation Systematic allocation of an asset's cost over its useful life, reflecting wear and tear or obsolescence, except for land. Useful Life Estimated period over which a fixed asset is expected to contribute to business operations and generate revenue. Accumulated Depreciation Contra asset account representing the total depreciation expense charged against an asset since its acquisition. Contra Asset An account that offsets a related asset account on the balance sheet, such as accumulated depreciation reducing asset book value. Necessary Expenditures All costs required to acquire an asset and prepare it for intended use, including taxes, installation, and removal of old structures. Salvage Value Estimated residual value received from disposing of an asset or its components, deducted from initial cost calculations. Capitalization Process of recording expenditures as part of an asset's cost on the balance sheet, rather than expensing them immediately.
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