6 Questions
Which of the following best describes prepaid expenses?
Expenses already paid, but not yet incurred or used
What are accrued expenses?
Expenses incurred or used, but not yet paid
Which term refers to the reduction in the value of an asset over time due to wear and tear?
Depreciation
What is residual value?
The value expected in the asset after its useful life
What is acquisition cost?
The amount an entity paid to acquire the depreciable asset
What does the straight-line depreciation formula calculate?
The straight-line depreciation formula
Study Notes
Prepaid Expenses
- Prepaid expenses are payments made in advance for goods or services that have not yet been received or used.
Accrued Expenses
- Accrued expenses are expenses that have been incurred but not yet paid.
Depreciation
- Depreciation refers to the reduction in the value of an asset over time due to wear and tear.
- It is a non-cash expense that represents the decrease in value of an asset over its useful life.
Residual Value
- Residual value is the estimated value of an asset at the end of its useful life.
Acquisition Cost
- Acquisition cost is the initial cost of purchasing an asset, including any additional costs necessary to put the asset into use.
Straight-Line Depreciation Formula
- The straight-line depreciation formula calculates the depreciation expense of an asset over its useful life by dividing the acquisition cost by the number of years of its useful life.
Test your knowledge of adjusting entries for prepaid expenses, accrued expenses, and depreciation. Understand the concept of prepaid expenses, accrued expenses, and depreciation and their impact on financial statements.
Make Your Own Quizzes and Flashcards
Convert your notes into interactive study material.
Get started for free
