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Unit 2 · 9 lessons

Accounting for Assets

Receivables and bad debts, notes, inventory costing and control, and how capital and intangible assets are recorded, amortized and disposed of.

  • 88 practice questions
  • 71 flashcards
  • 4 interactive lessons
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Lessons

  1. 1Credit Terms, Card Sales and ReceivablesA sale can be paid in cash, by debit or credit card, or on account with credit terms, and each one is journalized differently: card sales bring in cash less a processing fee, while sales on account create a receivable tracked in a subsidiary ledger.Interactive9 questions
  2. 2Estimating Bad Debts: The Allowance MethodThe allowance method estimates uncollectible accounts in the same year as the sales that caused them, using either a percentage of credit sales or an aging of receivables that sets the allowance to a target balance.9 questions
  3. 3Notes Receivable and InterestA note receivable is a written promise to pay a principal plus interest on a set maturity date; the payee records interest as principal × rate × days/365, accrues any interest earned by year end, and records the note as honoured or dishonoured at maturity.9 questions
  4. 4Inventory Costing MethodsWhen identical goods are bought at different costs, a business needs a cost formula (specific identification, FIFO, or weighted or moving average; LIFO is not permitted in Canada) to split the cost of goods available between cost of goods sold and ending inventory, and the choice changes reported profit.Interactive10 questions
  5. 5Inventory Errors, Technology and Internal ControlAn ending-inventory error misstates cost of goods sold, profit, assets and equity this year and reverses itself next year, which is why businesses use technology for accurate tracking and internal controls to protect inventory and its records.10 questions
  6. 6Capital Expenditures and the Cost of Capital AssetsA cost that helps earn revenue for more than one year is a capital expenditure recorded as an asset at everything it took to buy it and get it ready for use; a cost that only benefits this year is a revenue expenditure and goes straight to expense.10 questions
  7. 7Amortization MethodsStraight-line spreads an asset's depreciable amount evenly, declining-balance charges more in early years at a fixed rate on book value, and units-of-output follows actual use; all three expense the same total but change each year's net income and book value.Interactive11 questions
  8. 8Revisions, Disposals and DepletionChanged estimates are applied to the remaining book value over the remaining life; a disposal first brings amortization up to date, then removes cost and accumulated amortization and records any gain or loss; natural resources are depleted per unit extracted.Interactive10 questions
  9. 9Intangible Assets and GoodwillPurchased intangibles are recorded at cost; finite-life ones are amortized straight-line over the shorter of legal and useful life with no residual, indefinite-life ones and goodwill are not amortized but are tested for impairment, and goodwill is recorded only when a business is bought.10 questions