CASE ABF 2.1

Front

What is straight-line depreciation?

Back

A method of allocating the cost of a tangible asset over its useful life, calculated by subtracting the salvage value from the purchase price and dividing by the number of years.

Front

How do you calculate annual straight-line depreciation?

Back

(Cost of Asset - Salvage Value) / Useful Life in Years.

Front

What is the formula for calculating interest on a loan?

Back

Interest = Principal x Rate x Time.

Front

What is a cash expense?

Back

An outflow of cash for goods or services that are consumed or used in the business.

Front

What is noncash income?

Back

Income that does not involve cash transactions, such as increases in asset value.

Front

What does a positive net income indicate for a business?

Back

It indicates that the business is profitable, earning more than it spends.

Front

What is the salvage value of an asset?

Back

The estimated residual value of an asset at the end of its useful life.

Front

What is the significance of classifying record entries in accounting?

Back

It helps in understanding the nature of transactions and their impact on financial statements.

Front

What is the difference between cash income and noncash income?

Back

Cash income involves actual cash transactions, while noncash income reflects increases in asset value without cash exchange.

Front

How do you determine the useful life of an asset?

Back

It is the period over which the asset is expected to be used in business operations.