Accumulated depreciation represents the total depreciation expense that has been recorded against a fixed asset since its acquisition or establishment 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.
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.
Amortization is the process of gradually writing off the initial cost of an asset over a specific term or the repayment of debt in installments.
A method of calculating the depreciation on a fixed asset designed to produce a constant annual charge that includes both depreciation and the cost of capital.
Asset classification refers to the systematic categorization of assets on a balance sheet, distinguishing between fixed and current assets as mandated by the Companies Act and Financial Reporting Standard (FRS 102) in the UK and Republic of Ireland.
Asset valuation involves determining the current worth of an organization's assets, considering various valuation methods including revaluation and present value calculations.
Balance-Sheet Total refers to the total net worth of an organization, encompassing both fixed and current assets minus long-term liabilities. It is an important metric in financial reporting and is particularly relevant in the qualification criteria for small and medium-sized company exemptions.
Capital assets are forms of property with a relatively long life, often used in trade or business, that receive specific tax treatments when sold, resulting in either capital gain or capital loss.
Capital Employed is the total amount of capital that a company uses to generate profits and includes shareholder's equity and long-term debt, or the sum of fixed and net current assets. This metric is pivotal in ratio analysis for assessing the efficiency and profitability of a company's capital investments.
Capital expenditure, often referred to as capital costs or capital investment, pertains to substantial expenses incurred by an organization for purchasing or enhancing fixed assets. These costs are capitalized on the balance sheet and depreciated over the asset's useful life.
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.
A capital intensive business involves significant investment in fixed assets such as plant and machinery. These companies are regarded as high-risk investments, particularly in times of economic downturns, due to the high proportion of fixed costs.
Capital requirement refers to the amount of capital a business needs to sustain its operations, including both long-term and working capital necessary for maintaining day-to-day functionality and growth.
Capital transactions refer to significant financial activities involving things like share capital and reserves, long-term debt capital, or fixed assets of a company, as opposed to revenue transactions which are common, operational activities.
Carriage Inwards, also known as Freight Inwards, refers to the delivery costs incurred by a business when purchasing goods. If these costs are associated with fixed assets, they can be capitalized and included in the cost of the asset on the balance sheet.
The balance-sheet value of an asset or liability, representing the amount at which it is reported on the financial statements.
Expenditure on fixed assets to which a company is committed for the future. Such commitments are usually disclosed in the directors' report and notes to the accounts.
The traditional method of measuring fixed assets where they are valued at their historical cost less accumulated depreciation, with an alternative being the revaluation model.
The declining balance method is a commonly used depreciation technique in accounting where an asset loses value by a fixed percentage each year, reflecting the reality that assets tend to lose more value early in their useful lives.
Depreciation refers to the methodical reduction in the recorded cost of a tangible fixed asset, allocated over its useful life. It is a key accounting concept employed to denote the impairment of value of assets over time due to wear and tear, age, or obsolescence.
Depreciation methods are accounting techniques used to allocate the cost of a tangible asset over its useful life systematically. These methods are essential for properly matching expenses with revenues.
The diminishing-balance method, also known as the reducing-balance method, is a way of calculating depreciation of fixed assets whereby the annual depreciation charge is a fixed percentage of the depreciated value at the beginning of each period.
A Disposals Account is used in accounting to record the removal of a fixed asset from the ledger, capturing its original cost, accumulated depreciation, and the amount received upon disposal.
Economic value is the present value of future cash flows expected to be generated by an asset. It provides a measure of the worth of an asset considering its future income and cost streams.
Fixed assets are long-term assets used in the operations of a business, such as land, buildings, machinery, and equipment. These assets are essential for production and business operations and are classified in various ways on the balance sheet.
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.
Fixed Capital refers to the amount of an organization's capital that is invested in its fixed assets, such as buildings, machinery, and equipment, which are essential for ongoing operations and production.
The Fixed-Asset to Equity-Capital Ratio is a financial metric used to assess a business's ability to satisfy long-term debt by comparing the value of its fixed assets to its equity capital.
A ratio that measures an organization's activity over a period by calculating the number of times the sales are a multiple of the balance-sheet value of the fixed assets.
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.
Free depreciation is a method of granting tax relief to organizations by allowing them to charge the cost of fixed assets against taxable profits in whatever proportions and over whatever period they choose. This provides considerable flexibility for businesses in managing their cash flow and tax liabilities.
A term used in accounting to describe a fixed asset to which all allowable depreciation has been charged according to accounting or tax laws. The asset is carried on the books at its residual value, although its market value may be higher or lower.
The presentation of a financial statement in which the debits are given on one side of the statement and the credits on the other. In the case of a balance sheet, the fixed assets and current assets would be shown on the left-hand side of the statement, and the capital and liabilities on the right-hand side.
Impairment refers to the reduction in the recoverable amount of a fixed asset or goodwill below its carrying amount, often due to obsolescence, damage, or market value decline.
An impairment review is a critical process conducted by entities to assess whether the carrying amount of a fixed asset or goodwill may not be recoverable due to certain events or changes in circumstances.
Investing activities, as required by Financial Reporting Standard (FRS) 1, show the cash flows related to the acquisition or disposal of the organization's long-term assets.
Life-cycle costing is a comprehensive approach to determining the total costs of a fixed asset, accounting for not just acquisition costs but also operational and maintenance expenses over its lifetime.
Linear depreciation involves writing off a constant amount of an asset's value every year, resulting in a straight-line graph when the depreciation expense is plotted against time.
Long-term debtors refer to individuals or entities that owe money to an organization but are not expected to make payment within the near future, typically beyond a 12-month period.
Machinery and plant refer to various types of equipment and fixtures used for manufacturing and industrial purposes. These assets are key components in business operations, typically classified under fixed assets on the balance sheet.
A corporation that has production facilities or other fixed assets in at least one foreign country and makes its major management decisions in a global context; sometimes called transnational corporation.
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.
Notes to the accounts, also known as notes to financial statements, provide detailed information and explanations that support and complement a company's financial statements. These notes help users understand and interpret the financial data and the company's overall performance and financial health.
Obsolescence refers to the decline in the value of an asset due to its age or reduced usefulness caused by technological advancements or market changes.
The original cost refers to the initial amount paid to acquire an asset, which is used as the basis for financial reporting and depreciation calculations.
Plant assets, also known as fixed assets, are composed of land, buildings, machinery, furniture, fixtures, and other equipment permanently employed in business operations. In some contexts, the term 'plant' may refer specifically to buildings or land and buildings.
Plant and equipment, often referenced as property, plant, and equipment (PP&E), are long-term assets essential to manufacturing, production, and operations. It includes real estate, machinery, vehicles, and significant fixtures integral to the business.
Property, Plant, and Equipment (PP&E) are tangible fixed assets used in operating a business. This category includes land, buildings, machinery, fixtures, and other types of equipment that are expected to be used over multiple accounting periods.
Provision for depreciation refers to the allocation of the cost of a tangible fixed asset over its useful life, ensuring accurate representation of asset value in financial statements and compliance with accounting and tax regulations.
The term 'recovery' in various fields refers to the period when economic activity picks up after a downturn, absorption of costs or collections in finance, and rising prices in investment markets.
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.
Revaluation involves increasing the value of an asset to reflect its current market value, where the asset cost account is debited and the revaluation reserve is credited.
A method of determining the depreciation charge on a fixed asset against profits for an accounting period by revaluing the asset each year and writing off the fall in value.
The expenditure incurred in order to carry out the operations of a fixed asset. Examples are power, maintenance, and consumable materials for a machine or fuel, oil, tires, and servicing for motor vehicles.
The net residual value of an asset at the end of its useful life, when it is no longer suitable for its original use. Fixed assets, inventory, or waste arising from a production process can all have a salvage value.
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.
The SCFP is a financial statement that provides a detailed picture of a company's financial health over a specific period, highlighting the changes affecting working capital and non-working capital due to significant noncurrent transactions.
A method of calculating the amount by which a fixed asset is to be depreciated in an accounting period, using a constant annual depreciation charge against profits year by year.
The sum-of-the-digits method is a technique for calculating the depreciation of a fixed asset, where the majority of the depreciation is recognized in the early years of the asset's life.
Tangible assets are physical items that hold value and can be seen and touched, used by businesses to generate revenue.
The unamortized cost is the historical cost of a fixed asset minus the total depreciation or amortization applied to it up to a specified date. It represents the current book value of the asset in financial accounting.
The useful economic life, or useful life, is the period for which the present owner of an asset will derive economic benefits from its use.
