Accelerated depreciation is a method of depreciating assets faster than the standard useful-life method, resulting in higher depreciation expenses earlier in the asset's life. This method is particularly useful for assets that lose their value quickly due to rapid innovation or technological change.
A comprehensive document detailing a business's accounting policies and procedures, often including account codes and a chart of accounts. Key aspects include methods for treating depreciation and other asset-related processes.
Accretion is an increase in the value of an asset as a result of a physical change, such as a growing crop, rather than due to a change in its market price. It describes the natural growth or incremental increase in the value of an asset.
Accrued revenue refers to revenue that has been earned by a company but has not yet been recorded in the accounts because the corresponding invoice has not been sent or payment has not been received. It is considered an asset on the balance sheet.
Aggregate depreciation refers to the total amount of depreciation expense that has been accumulated over time for a fixed asset or group of assets since the beginning of their use.
The sale by a borrower of some or all of the assets that form the actual or implied security for a loan, often subject to provisions restricting such disposal.
Allowance for depreciation refers to the reduction in the book value of a fixed asset due to wear and tear, age, or obsolescence. It is an accounting term that allows businesses to allocate the cost of an asset over its useful life.
To accumulate an item such as money, property, or goods. A company may stock up on a commodity now for future sale when it believes that a sharp increase in the price of the commodity will take place at a later date.
Asset Management involves the systematic process of developing, operating, maintaining, and selling assets in a cost-effective manner. This term is typically used in the financial world to describe the management of investments, aiming to grow their value over time and achieve higher returns.
An assets register, commonly referred to as a fixed-assets register, is a detailed ledger used by organizations to track and manage their fixed assets, including the acquisition, depreciation, and disposal of these assets.
A bridging loan is a short-term loan taken to bridge the gap between the purchase of one asset and the sale of another. It is commonly used in the property and housing market.
Capital Expenditure (CapEx) refers to the funds used by a company to acquire, upgrade, and maintain physical assets such as property, industrial buildings, or equipment. It is often used to undertake new projects or investments by the firm.
Capital Expenditure (CAPEX) refers to funds used by a business to acquire, upgrade, and maintain physical assets such as property, industrial buildings, or equipment. These expenditures are capitalized and either depreciated or depleted over their useful life, as opposed to repairs, which are deducted from the current year's income.
Capital Turnover, also known as Asset Turnover, measures the efficiency of a company in using its assets to generate sales revenue. A higher ratio indicates better utilization of assets in generating sales.
Class Life Asset Depreciation refers to the tax guidelines that determine the period over which different types of assets can be depreciated. The IRS uses these guidelines to assign a specific 'class life' to asset categories, dictating how many years over which the depreciation can be calculated.
In various financial contexts, the term 'clear' refers to the process of validating and finalizing transactions, whether in banking, finance, or securities markets. This ensures accurate and timely settlements.
Committed costs are typically fixed costs that management has a long-term responsibility to pay, such as rent on a long-term lease and depreciation on an asset with an extended life.
Composite depreciation is a method where a single depreciation rate is applied to an entire asset, despite its components having varying useful lives.
A conservator is a court-appointed custodian of assets belonging to someone determined by the courts to be unable to manage his or her own property.
A current asset refers to cash, accounts receivable, inventory, and other assets that are likely to be converted into cash, sold, exchanged, or expensed in the normal course of business, usually within a year.
Current-cost depreciation is a depreciation charge calculated on the current cost of an asset rather than its historical cost. It adjusts for changes in the value of assets over time to ensure financial statements reflect more accurate asset values.
A debit is an entry on the left-hand side of an account in double-entry bookkeeping that increases assets or recorded expenditures of an organization. In the context of a bank account, a debit indicates an outflow of funds.
The process of systematically reducing the recorded cost of a tangible fixed asset over its useful life.
Depreciated cost, also known as depreciated value or net book value, is the value of an asset after accounting for depreciation. This concept is vital for businesses to manage asset values accurately over time.
Depreciation is the systematic allocation of the cost of a tangible asset over its useful life. It reflects the asset's usage, wear and tear, or obsolescence.
Depreciation refers to the reduction in the value of an asset over time, often due to wear and tear. This accounting process allows businesses to allocate the cost of a tangible asset over its useful life.
Disinvestment refers to the process of reducing investment in a particular activity, asset, company, or location. Often used in the context of government policies and corporate strategy, it involves selling off or liquidating assets to reallocate resources more effectively.
Disposal value, also known as residual value or salvage value, is the estimated amount that an owner expects to obtain from the sale of an asset at the end of its useful life.
Divestment is the process of selling off assets, subsidiaries, or business segments to realize value or streamline operations. It serves as the opposite of investment.
The Double Declining Balance Method is a form of accelerated depreciation method that spreads the cost of an asset more heavily in the early years of its service life.
The double-declining-balance method of depreciation involves applying twice the straight-line rate to the depreciable balance of an asset.
Economic Life refers to the period during which a machine or other property is expected to generate more revenue than operating expenses, thereby staying profitable and justifying its use.
The period of time over which a taxpayer will use an asset. In theory, depreciable assets are written off over this period for depreciation purposes. However, tax laws often use artificial recovery periods unrelated to the estimated useful life.
Financial assets include stocks, bonds, rights, certificates, bank balances, and other securities, distinguishing themselves from tangible, physical assets like real property.
A fixed assets register is a detailed record that keeps track of all the fixed assets owned by an individual or organization. It includes important information such as asset location, purchase details, useful life, and depreciation values, aiding in accurate financial reporting and asset management.
A comprehensive listing of a company's fixed assets, detailing each asset's location, cost, revaluation, estimated net value, useful economic life, depreciation method, accumulated depreciation, and net book value.
A fund refers to a pool of financial resources managed and set aside for a specific purpose. Common types of funds include mutual funds, pension funds, and endowment funds, among others.
Furniture, fixtures, and equipment (FF&E) are movable assets essential to the operation of a business, often found in hospitality industries such as hotels and motels. These items typically wear out faster than other properties, necessitating detailed management of their condition, cost, and replacement frequency.
High Net-Worth Individuals (HNWIs) are individuals with substantial financial assets or investment portfolios. Their significant wealth typically qualifies them for specialized financial services and investment opportunities.
A holdout is an individual or entity that refuses to sell an asset or agree to terms in the early stages of negotiation, typically in an attempt to realize a higher price or more favorable conditions.
Refers to a period between the short and long term, with its specific duration varying depending on the context. For example, stock analysts typically consider it as 6 to 12 months, whereas bond analysts usually think of it as 3 to 10 years.
Investment banking encompasses a range of financial services focused on serving large corporations, public bodies, and investors, distinguishing itself from retail or commercial banking by not directly involving individual depositors.
Investment demand refers to the desire and willingness of firms and individuals to invest in various projects and financial assets under given economic conditions.
A leaseback transaction involves a property owner selling the property and then leasing it back from the buyer. This allows the original owner to continue using the property while receiving an influx of capital from the sale.
A lessor is an individual or entity that grants a lease to another party, allowing them to use an asset for a specified period in exchange for periodic payments. Lessors are commonly involved in real estate, equipment leases, and other forms of property or assets.
Liquidity risk refers to the potential risk that an investment cannot be liquidated during its life without significant costs or losses. This is particularly relevant in lending operations, where the ability to quickly convert an asset to cash is crucial.
A living trust, also known as an inter vivos trust, is a legal document created and operational during the lifetime of the settlor to manage their assets and streamline the transfer of those assets after their death, thereby avoiding probate.
A management fee is a charge against assets for the administration and management of portfolios, funds, or real estate properties. It encompasses services such as investment management, shareholder relations, administration, rent collection, maintenance, and bookkeeping.
Marketability refers to the speed and ease with which a particular product or investment may be bought and sold. While it is often used interchangeably with liquidity, liquidity specifically implies the preservation of value when a security is bought or sold.
MACRS is a depreciation method introduced in 1986 to calculate tax depreciation for property placed in service after its inception. It allows businesses to recover the cost basis of certain property more quickly, by assigning longer lives for personal property and offering conventions for calculation.
Monetary assets and liabilities represent specific sums of money that are either receivable or payable, captured in a company's financial statements, including cash, bank balances, loans, debtors, and creditors.
A nest egg refers to assets saved or set aside for a significant purchase or a person's retirement. These assets are generally invested in conservative financial instruments to safeguard their value and ensure steady growth over time.
The net asset value (NAV) represents the per-share value of a fund's assets minus its liabilities, used to measure the performance of mutual funds, ETFs, and similar investment vehicles.
A noncurrent asset is an asset that is not expected to be converted into cash, sold, or exchanged within the normal operating cycle of the firm, usually one year. Examples include fixed assets such as real estate, machinery, and other equipment.
An Official Receiver (OR) is an officer of the court, appointed to manage the estates of insolvent companies or bankrupt individuals. They are responsible for administering the insolvency processes, including the realization and distribution of assets.
Personal financial planning software assists users in examining revenue and expenses, comparing actual to budget, monitoring assets and liabilities, conducting goal analysis, investment portfolio analysis, tax planning, and retirement planning.
The term 'Placed in Service' refers to the date when property is in a state of readiness and is available for a specific use. This is a critical concept in accounting and taxation, as it determines the start of depreciation or amortization for the asset.
A QTIP trust allows a grantor to provide income for their surviving spouse and designate other beneficiaries for the remaining trust assets after the surviving spouse's death.
Quick assets, also known as liquid assets, are cash and other assets that can be quickly converted into cash without significant loss of value. They are crucial in assessing the short-term liquidity and financial health of a business.
The rate of turnover, also known as the turnover ratio, depicts how frequently some part of the assets of an organization is turned over (i.e., replaced by others of the same class) within a specified period, typically a year.
Real Estate Owned (REO) refers to property acquired by a lender, typically a bank or other financial institution, through foreclosure. This property is then held in the lender's inventory and goes through an asset management process to either sell it off or put it into productive use. REOs are common outcomes of non-performing loans which lead to foreclosure actions.
The number of years over which the cost of an asset may be depreciated.
The revenue expenditure incurred in maintaining the assets of an organization in their original condition as far as possible. Any expenditure incurred in improving the assets would normally be regarded as capital expenditure and therefore not repairs and maintenance.
The period over which a product or fixed asset will need to be replaced owing to obsolescence.
Reserve for Depreciation, also known as Accumulated Depreciation, is an accounting term used to describe the total amount of depreciation that has been expensed against an asset's value over time. It reflects the reduction in an asset’s book value due to wear and tear, age, or obsolescence.
A revocable trust is an estate planning tool that allows the grantor to alter or cancel the trust agreement during their lifetime, providing flexibility compared to an irrevocable trust.
Safekeeping refers to the storage and protection of assets, valuables, or documents to ensure their security and proper management. It ranges from using a bank safe deposit box to utilizing services from financial institutions like banks and brokerage firms.
A sale and leaseback transaction involves the owner of an asset selling it and then immediately leasing it back from the buyer. This allows the original owner to continue using the asset while freeing up capital.
Salvage value, also known as scrap value, is the estimated residual amount that an asset is expected to realize when it is sold at the end of its useful life.
Scrap refers to the remaining residual value of an asset at the end of its useful life, which can sometimes be recovered for a minimal monetary return, often referred to as salvage value. Additionally, scrap can arise from waste materials during a production process.
Scrap value, also referred to as salvage value, is the estimated residual value of an asset at the end of its useful life. This is the amount the owner expects to obtain from the sale of the asset following its complete depreciation.
Shares of Beneficial Interest are proof of an individual's rights and interest in the assets held in a trust or other legal entity.
A statement can refer to a summary of financial transactions, a document showing the status of assets and liabilities, or an instruction in a computer program.
The straight-line method of depreciation is a calculation method whereby an equal amount of an asset's cost is allocated as an expense for each year of the asset's useful life. This method is commonly used for accounting and tax purposes.
The Sum-of-the-Years'-Digits (SYD) depreciation is a method of allocating the cost of an asset over its useful life. This method involves computing a fraction each year that is applied against the depreciable amount, making it an accelerated depreciation method.
The Sum-of-the-Years'-Digits (SYD) method is an accelerated depreciation technique that allows for higher depreciation expenses in the earlier years of an asset's life and lower expenses as the asset ages.
A Tangible Asset is any asset with physical existence, such as real estate, gold, or machinery.
A treasurer is a key financial executive responsible for managing the financial assets and liabilities of an organization, ensuring sound financial practices, and maintaining strategic relationships with financial markets.
A comprehensive guide to understanding the nature, administration, and implications of general management in trust operations.
Two and Twenty is a typical formula for compensation of hedge fund managers, where 2% of total asset value is charged as a management fee, and an additional 20% of profits is taken as a performance fee.
The Uniform Gifts to Minors Act (UGMA) is a legislative framework adopted by most U.S. states to govern the distribution and administration of assets gifted to minors. It allows minors to own assets without requiring the services of an attorney to establish a special trust.
The Units of Production Method is a depreciation approach in which expense is based on the real usage of an asset, typically used for machinery and production equipment. This method relates an asset’s depreciation expense to the total production output or usage during its useful life.
The unrecovered cost represents the unexpired book value of an asset, typically calculated as the original cost less accumulated depreciation.
Wear and tear refers to the reduction in value of a fixed asset as a result of its regular usage and the inevitable damage it sustains over its working life. It is one of the primary reasons behind asset depreciation.
