Recognizing Differences
Recognizing Differences - Week 4
Kevin A. Froy
XACC/291
February 19, 2014
Shontell Chrisman
Recognizing Differences - Week 4
According to Weygandt, Kimmel, and Kieso (2010), in accounting valuation means a company is establishing a value, or estimating a value of an item. The resources can be assessed as an asset or a liability. Bonds are an example of a liability, and stocks, patents, and trademarks are assets. To get an accurate valuation, one has to determine the dependability of the company’s finances. The fiscal statement is prepared by using the generally accepted accounting practices (GAAP). The person that does the statements needs to be thoroughly aware of the proper ways to establish valuation.
When natural resources get used up, depletion has occurred. In a comparison, oil would be considered as depleted because it is a natural resource. A forklift that a business uses would not, because over time it has depreciated, not been depleted. The forklift would be depreciated with the passing of time. When an item is exhausted, the company adjusts the books to have the depleted resource moved from the balance sheet to the income statement. This is to ensure that the revenues of natural resources correspond with the cost of natural resources.
Amortization happens when a company deducts intangible items from those that do not have a set span of life. Examples of amortized items are patents and trademarks. The information concerning the intangible asset based on lifespan can be found on the cash flow statement. Amortization gets expended in accrual accounting. The transactions made are followed with the accrual basis of accounting. According to Axiom Financial (2014), amortization is considered to be “goodwill”. Amortization relates to items like notes receivables and asset balances.
Depreciation is like amortization. It is one of the essences in accrual accounting. It is the writing off the diminishing value of particular items during
Kevin A. Froy
XACC/291
February 19, 2014
Shontell Chrisman
Recognizing Differences - Week 4
According to Weygandt, Kimmel, and Kieso (2010), in accounting valuation means a company is establishing a value, or estimating a value of an item. The resources can be assessed as an asset or a liability. Bonds are an example of a liability, and stocks, patents, and trademarks are assets. To get an accurate valuation, one has to determine the dependability of the company’s finances. The fiscal statement is prepared by using the generally accepted accounting practices (GAAP). The person that does the statements needs to be thoroughly aware of the proper ways to establish valuation.
When natural resources get used up, depletion has occurred. In a comparison, oil would be considered as depleted because it is a natural resource. A forklift that a business uses would not, because over time it has depreciated, not been depleted. The forklift would be depreciated with the passing of time. When an item is exhausted, the company adjusts the books to have the depleted resource moved from the balance sheet to the income statement. This is to ensure that the revenues of natural resources correspond with the cost of natural resources.
Amortization happens when a company deducts intangible items from those that do not have a set span of life. Examples of amortized items are patents and trademarks. The information concerning the intangible asset based on lifespan can be found on the cash flow statement. Amortization gets expended in accrual accounting. The transactions made are followed with the accrual basis of accounting. According to Axiom Financial (2014), amortization is considered to be “goodwill”. Amortization relates to items like notes receivables and asset balances.
Depreciation is like amortization. It is one of the essences in accrual accounting. It is the writing off the diminishing value of particular items during
References: Axiom Financial. (2014). Mortgage Education. Retrieved from Http://www.axiomfinancial.com/news/amortization-business-accounting Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2010). Financial accounting (7th ed.). Hoboken, NJ: John Wiley & Sons.