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Unit 2 accounting cycle会计英语Accounting Equation and Double Entry会计等式与复式记账法The financial condition or position of a business enterprise is represented by the relationshipof assets to liabilities and capital.一个企业的财务是由资产对负债和资本的关系来表示的。
Assets are properties that are owned and have monetary value; for instance, cash, inventory, buildings, equipments.资产是指企业所拥有的、具有货币价值的财产，如现金、存货、建筑物、设备。
Liabilities are amounts owned to outsiders, such as notes payable, accounts payable, bonds payable. Liabilities may also include certain deferred items, such as income taxes to be allocated.负债是欠外部的数额，如应付票据、应付账款、应付债券。
负债还可以包括某些递延的项目，如待分配的所得税。
Capital is the interest of the owner in an enterprise. Also known as owner’s equity.资本是企业所有者的利益，也称之为业主权益。
These three basic elements are connected by fundamental relationship called balance-sheet equation, sometimes called simply the accounting equation.This equation expresses the equality of the assets on one side with the claims of the creditorsand owners on the other side:Assets = Liability + Capital.这三个基本的要素由一个叫做资产负债表等式、有时称之为会计等式的关系式联系起来。
《会计专业英语》课堂教案本次课标题：Lesson 1 Accounting:An Information system授课班级10会计上课时间2学时上课地点教学目标能力（技能）目标知识目标①Understand capital markets and decision making.②Identify the users of accounting information.Master the news words and terms①Understand the history and development ofaccounting②Explain the difference between Financialaccounting and managerial accounting能力训练任务及案例本章要求学生对会计的内涵、会计执业的内涵、会计信息使用者有大致的了解。
可从近期出现的新闻热点事件出发，从分析重大经济案例着手。
教学重点/难点教学重点：The definition of Accounting. The purpose of Accounting system.The principle of Accounting.教学难点：The requirement of Accounting information.The users of Accounting information.The Accounting profession.教材/教参教材：常勋肖华,《会计专业英语》，上海：立信会计出版社，2005年11月。
参考资料：1.李海红，实用会计英语.大连：大连理工出版社，2010年2月二、教学(过程)设计步骤教学活动教学方法教学手段学生活动时间分配（分钟）一会计英语课程介绍：详细的介绍本课程的定位，教学目标，教学内容，考核方式，参考资料等。
（详细内容见说课PPT）讲授法谈话法讨论法多媒体谈谈对本课程的期望与看法。
会计英语1－10课Text 1 Accounting and Its EnvironmentDevelop an accounting vocabulary for decision making. Accounting is a system for measuring, processing, and communicating financial information. As the “language of business,” accounting helps a wide range of decision makers. Accounting dates backs to ancient civilizations, but its importance to society has been greatest since the Industrial revolution. Apply accounting concepts and principles to analyze business transactions. The three basic forms of business organization are the proprietorship, the partnership, and the corporation. Whatever the form, accountants use the entity concept to keep the business’s records separate from the personal records of the people who run it. Accountants at all levels must be ethical to serve their intended purpose. Generally accepted accounting principles (GAAP) guide accountants in their work. Among these guidelines are theentity concept, the reliability principle, the cost principle, the going-concern concept, and the stablemonetary-unit concept.Use the accounting equation to describe an organization’s financial position. In its most common form, the accounting equation is Assets=Liabilities + Owner’s Equity.Use the accounting equation to analyze business transactions. Transactions affects a business’s assets, liabilities, and owner’s equity. Therefore, transactions are analyzed in terms of their effect on the accounting equation.Prepare the financial statements. The financial statements communicate information for decision making by the entity’s managers, owners, and creditors and by government agencies. The income statement presents a video of the entity’s operations in terms of revenues earned and expenses incurred during a specific period. Total revenues minus total expenses equal net income. Net income or net loss answers the question, How much income did the entity earn, or How much loss did it incur during the period? The statement of owner’s equity reports the changes in owner’s equity during the period. The balance sheet provides a photograph of the entity’s financial standing in terms of its assets, liabilities, and owner’s equity at a specific time. It answers the question, What is the entity’s financial position? The statement of cash flows reports the cash coming in and the cash going out during the period. It answers, Where did cash come from , and, Where did it go?Evaluate the performance of a business. High net income indicates success in business; net loss indicates a bad year.New wordsaccounting 会计学，结算measure 估量，衡量，计算process 初步分类，整理apply to 把···应用于transaction 交易principle 原理proprietorship 独资企业，所有权partnership 合伙关系，合伙企业corporation 公司，企业entity 实体，统一的，权益ethical 合乎道德的intended 预期的GAAP 普通会计原理guideline 方针，指南entity concept 主体概念reliability principal 可信性原则cost principal 成本原则going-concern concept 持续经营概念stable-money-unit concept 稳定货币单位的概念equation 等式owner’s equity 投资者权益financial statement 财政报表agency 机构income statement 损益报表video 说明revenues 总收入incurrent 遭受minus 减去balance sheet 资产负债表，决算表indicate 表明，暗示expenses 开支，消费Text 2 Recording Business TransactionDefine key accounting terms: account, ledger, debit, and credit. The account can be viewed in the form of the letter “T”. The left side of each T-account is its debit side. The right side is its credit side. The ledger, which contains a record for each account, groups and numbers accounts by category in the following order: assets, liabilities, and owner’s equity (and its subparts, revenues and expenses).Apply the rules of debit and credit. Assets and expenses are increased revenues are increased by credits. Liabilities, owner’s equity, and revenues are increased by credits and decreased by debits. The side—debit or credit—of the account in which increases are recorded is that account’s normal balance. Thus the normal balance of assets and expenses is a debit, and the normal balance of liabilities, owner’s equity, and revenues is a credit. The Withdrawals account, which decreases owner’s equity, normal has a debit balance. Revenues, which are increases in owner’s equity, have a normal credit balance. Expenses, which are decreases in owner’s equity, have a normal debit balance.Record transactions in the journal. The accountant begins the recording process by entering the transaction’s information in the journal, a chronological list of all the business’s transactions.Post from the journal to the ledger. The information is then posted-transferred-to the ledger accounts. Posting references are used to trace amounts back and forth between the journal and the ledger. Businesses list their account titles and numbers in a chart of accounts.Prepare a trial balance is a summary of all the account balance in theledger. When double-entry accounting has been done correctly, the total credits in the trial balance are equal.Set up a chart of accounts for a business. The first step in accounting is to set up the chart of accounts.Analyze transactions without a journal. Decision makers must often make decisions without a complete accounting system. They can analyze the transactions without a journal.We can now trace the flow of accounting information through these steps:Business Transaction→ Source Documents → Journal Entry → Posting to Ledger → Trial Balance.New wordsledger 分类帐debit 记入借方的款项，借方assets 资产liabilities 债务subpart 分类chronological 按时间顺序的transfer 转移chart 图表accountant 会计Text 3 Measuring Business Income: the Adjusting ProcessDistinguish accrual basis accounting from cash-basis accounting. In accrual-basis accounting, business events are recorded as they affect the entity. In cash-basis accounting, only those events that affect cash are recorded. The cash basis omits important events such as purchases andsales of assets on account. It also distorts the financial statements by labeling as expenses those cash payments that have long-term effects, such as the purchases of buildings and equipment. Some small organizations, use cash-basis accounting, but the generally accepted method is the accrual basis.Apply the revenue and matching principles. Businesses divide time into definite periods--such as a month, a quarter, and a year--to report the entity's financial statements. The year is the basic accounting period, but companies prepare financial statements as often as they need the in- formation. Accountants have developed the revenue principle to determine when to record revenue and the amount of revenue to record. The matching principle guides the accounting for expenses.Make adjusting entries at the end of the accounting period. Adjusting entries are a result of the accrual basis of accounting. These entries, made at the end of the period, update the accounts for preparation of the financial statements. One of the most important pieces of business information is net income or net loss, and the adjusting entries help to measure the net income of the period. Adjusting entries can be divided into five categories: prepaid expenses, depreciation, accrued expenses, accrued revenues, and unearned revenues.Prepare an adjusted trial balance. To prepare the adjusted trial balance, enter the adjusting entries .next to the unadjusted trial balance and compute each account's balance.Prepare the financial statements from the adjusted trial balance .The adjusted trial balance can be used to prepare the financial statements. Thethere financial statements are related as follows: Income, shown on the income statement, increases the owner's capital, which also appears on the statement of owner' s equity. The ending balance of capital is the last amount reported on the balance sheet.New Wordsaccrual n. 自然增长,自然增长额accrual-basis accounting 权责发生制cash-basis accounting 现金收付制omit vt. 省略，删distort vt. 曲解label vt. 把……列为definite adj. 明确的,确切的accounting period 结算期revenue principle 收益原则matching principle 配比原则adjusting entries 调整分录update vt . 使现代化net income 纯收入prepaid expenses 待摊费用depreciation n.贬值accrued expense 应计费用accrued revenues 应计收入unaccrued revenues 未实现收入adjusted trial balance 经调整过的试算表unadjusted trial balance 未经调整过的试算表Text 4 Completing the Accounting CyclePrepare an accounting worksheet, The accounting cycle is the process by which the accountants produce the financial statements for a special period of time. The cycle starts with the beginning account balances. During the period，the business journalizes transactions & posts them to the ledger accounts. At the end of the period, the trail balance is prepared,and the accounts are adjusted in order to measure the period’s net income or net loss. Completion of the accounting cycle is aided by use of a work sheet. This multicolumned document summarizes the effects of all the activity of the period.Use the work sheet to complete the accounting cycle. The work sheet is neither a journal nor a ledger but merely a convenient device for completing the accounting cycle. It has columns for the trail balance, the adjustments, the adjusted trail balance, the income statement, and the balance sheet. It aids the adjusting process, and it is the place where the period’s net income or net loss is first computed. The work sheet also provides a data for the financial statements & the closing entries. It is not, however, necessity. The accounting cycle can be completed from the less elaborate adjusted trail balance.Close the revenue, expense, and the withdrawal accounts. Revenue, expenses, and withdrawal represent, increases and decreases in owner’s equity for a specific period. At the end of the period, their balances are closed out to zero, and, for this reason, they are called temporary accounts. Assets, liabilities, and capital are not closed because they are the permanent account. Their balances at the end of one period become the beginning balances of the next period. The final accuracy check of the period is the postclosing trail balance.Correct typical accounting errors. Accountants correct errors by making correct journal entries.Classify assets and liabilities as current or long-term. The balance sheet reports current and long-term assets and current and long-term liabilities. Itcan be presented in report format or account format.Use the current & debt ratios to evaluate a business. Two decision-making aids are the current ratio—total current assets divided by total current liabilities—and the debt ratio—total liabilities divided by total assets.New Wordsaccounting cycle 会计循环account balance 帐户余额journalize 记日记帐ledger 分类帐，分户帐ledger account 分户帐目completion 完成，结束multicolumned 栏目纵横的worksheet 备忘单，工作底稿compute 计算，估算closing entries 项目终结elaborate 详尽阐述的withdrawal 提款temporary account 临时帐户permanent account 永久帐户postclosing trail balance 结帐后试算current 流动的，通用的report format 报告试account format 帐户试ratio 比率current ratio 流动比率debt ratio债务比率divide 整除Text 5 Merchandising and the Accounting Use sales, gross margin, and operating income to evaluate a company. The major revenue of a merchandising business is. sales revenue, or net sales. The major expense is cost of goods sold. Net sales minus cost of goods sold is called gross margin, or gross profit. This amount measures the business' s success or failure in selling its products at a higher pricethan it paid for them.The invoice is the business document generated by a purchase or sale transaction. Most merchandising entities offer discounts to their customers and allow them to return unsuitable merchandise. They also grant allowances for damaged goods that the buyer chooses to keep. Discounts and Returns and Allowances are contra accounts to Sales Revenue.Account for the purchase and sale of inventory. The merchandiser's major asset is inventory. In a merchandising entity the accounting cycle is from cash to inventory as the inventory is purchased for resale, and back to cash as the inventory is sold.Compute cost of goods sold and gross margin. Cost of goods sold, or cost of sales, is the cost of the inventory that the business has sold. It is the largest single expense of most merchandising businesses. Gross margin equals net sales revenue minus cost of goods sold.Adjust and close the accounts of a merchandising business. The end-of-period adjusting and closing process of a merchandising business is similar to that of a service business. In addition, a merchandiser adjusts inventory for theft losses, damage, and accounting errors.Prepare a merchandiser's financial statements. The income statement may appear in the single-step format or the multiple-step format. A single-step income statement has only two sections--one for revenues and the other for expenses--and a single income amount for net income. A multiple-step income statement has subtotals for gross margin and income from operations. Both formats are widely used.Use the gross margin percentage and the inventory turnover ratio toevaluate a business. Two key decision aids for a merchandiser are the gross margin percentage and the rate of inventory turnover .Increases in these measures in these measure usually signal an increase in profits.New Wordsmerchandising business 商品流通企业sales revenue = net sales 销售净收入cost of goods sold= cost of sales 销售产品成本，销售成本minus 减去gross margin = gross profit 毛利润invoice 发票discount 折扣allowance 折让return 退货inventory存货end-of-period 期终theft loss 失窃造成的损失single-step format单步骤化格式multistep format多步骤化格式subtotal 小计，部分和percentage比例，比率turnover周转gross margin percentage 毛利润比例rate of inventory turnover 存货周转率Text 6 Accounting Information SystemsDescribe the features of an effective accounting information system. An effective accounting information system should capture and summarize transactions quickly, accurately, and usefully. It should generate a variety of accounting reports, including financial statements and trial balances,that aid management in operating a business. The four major aspects of a good accounting system are (1) control over operations, (2)compatibility with the particular features of the business, (3) flexibility in response to changes in the business, and (4) a favorable cost/benefit relationship such that benefits outweigh costs.Understand how computerized and manual accounting systems are used. Computerized accounting systems process inputs faster than do manual systems and can generate more types of reports. The key components of a computerized accounting system are hardware, software, and company personnel. Account numbers play a bigger role in the operation of computerized systems than they do in manual systems, because computers classify accounts by account numbers. Both computerized and manual accounting systems require transactions to be classified by type.Computerized systems use a menu structure to organize accounting functions. Posting, trial balances, financial statements, and closing procedures are carried out automatically in a computerized accounting system. Computerized accounting systems are integrated so that the different modules of the system are updated together.Understand how spreadsheets are used in accounting. Spreadsheets are electronic work sheets whose grid points, or cells, are linked by means of formulas. The numerical relationships in the spreadsheet are maintained whenever changes are made to the spreadsheet. Spreadsheets are ideally suited to detailed computations as in budgeting.Use the sales journal, the cash receipts journal, and the accounts receivable subsidiary ledger. Manual accounting systems use specialjournals to record transactions by category. Credit sales are recorded in a sales journal, and cash receipts in a cash receipts journal. Posting goes to the general ledger and to the accounts receivable subsidiary ledger, which lists each customer and the amount receivable from that customer. The accounts receivable subsidiary ledger is the main device for ensuring that the company collects from customers.Use the purchases journal, the cash disbursements journal, and the accounts payable subsidiary ledger. Credit purchases in a manual system are recorded in a purchases journal and cash payments in a cash disbursements journal. Posting from these journals is to the general ledger and to the accounts payable subsidiary ledger. The accounts payable subsidiary ledger helps the company stay current in payments to suppliers.New Wordsaccounting information system 会计信息体系accurately 准确，精确generate导致，产生aspect方面compatibility 一致性，和谐性flexibility 机动性，灵活性outweigh 超过manual 用手操作的component 组成部分，成分hardware 硬件software 软件personnel全体成员，全体职员menu 菜单，目录automatically 自动地integrate使一体化module 组件，模块spreadsheet 电子工作表grid point 格点formula 程式numerical数字的budgeting 预算journal日记账cash receipt 现金收讫发票category 种类，类目credit 贷款，赊欠general ledger 总分类账subsidiary ledger 明细分类账，辅助帐账disbursement付出款cash disbursement 现金付出款purchase购买，购置purchase journal 购买议事录supplier 供应者Text 7 Internal Control, Cash Transaction, and Ethical Issues1 Define internal control. Internal controls should safeguard assets, ensure accurate accounting records, promote operational efficiency, and encourage adherence to company policies.2 Identify the characteristics of an effective system of internal control. An effective internal control system includes these features: reliable personnel, clear-cut assignment of responsibility, proper authorization, and separation of duties, which is the primary element of internal control. Many businesses use security devices, audits, and specially designed documents and records in their internal control systems. Effective computerized internal control systems must meet the same basic standards that good manual systems do.3 Prepare a bank reconciliation and the related journal entries. The bank account helps to control and safeguard cash. Businesses use the bank statement and the bank statement and the bank reconciliation to account for banking transactions.4 Apply internal controls to cash receipts. Different methods are used tocontrol cash receipts over the counter and cash receipts by mail.5 Apply internal controls to cash disbursements. A key control over cash disbursements is payment by check.6 Account for petty cash transactions. An imprest system is used to control petty cash disbursements.7 Weigh ethical judgments in business. Ethical judgments can be aided bya process that identifies the ethical issues, specifies the alternative actions, identifies the people involved, and assesses the possible consequences. New WordsSafeguard vt. 保卫，捍卫adherence n. 坚持，遵守promote vt. 促进，提高reliable personnel 可信赖的全体职工clear-cut adj. 明确的，鲜明的clear-cut assignment of responsibility 明确的责任分工authorization n. 授权，委任proper authorization 合理的授权separation of duties 职能的划分audit n. 查账reconciliation n.调节（指表示一个帐户的输字如何得之余另一帐户的计算过程）bank account 银行帐户bank statement 银行报表bank reconciliation 银行调节imprest n. 预付款imprest system 预支款体系alternative adj.选择的assess vt 对……进行估计Text 8 Accounts and Notes Receivables1 Use the allowance method of accounting for uncollectibles. Credit salescreate receivables. Accounts receivable are usually current assets, and notes receivable may be current or long-term. Uncollectible receivables are accounted for by the allowance method or the direct write-off method. The allowance method matches expenses to sales revenue and also results in a more realistic measure of net accounts receivable.2 Estimate uncollectibles by the percentage of sales and the aging approaches. The percentage of sales method and the aging of accounts receivable method are the two main approaches to estimating bad debts under the allowance method.3 Use the direct write-off method of accounting for uncollectibles. The direct write-off method is easy to apply, but it fails to match the uncollectible-account expense to the corresponding sales revenue. Also, Accounts receivable are reported at their full amount, which misleadingly suggests that the company expects to collect all its accounts receivable.In credit-card sales, the seller receives cash from the credit-card company (American Express, for example), which bills the customer. For the convenience of receiving cash immediately, the seller pays a fee that isa percentage of the sale.4 Identify internal control weaknesses in accounts receivable. Companies that sell on credit receive most customer collections in the mail. Good internal control over mailed-in cash receipts means separating cash-handling duties from cash accounting duties.5 Account for notes receivable. Notes receivable are formal credit agreements. Interest earned by the creditor is computed by multiplying the note's principal amount by the interest rate times the length of the interestperiod.Because notes receivable are negotiable, they may be sold. Selling a note receivable--called discounting a note--creates a contingent(possible) liability for the note’s payee.6 Report receivable on the balance sheet. All accounts receivable, notes receivable, and allowance accounts appear in the balance sheet. However, companies use various formats and terms to report these assets.7 Use the acid-test ratio and days' sales in receivables to evaluate a company's position. The acid-test ratio measures ability to pay current liabilities from the most liquid current assets. Days' sales in receivables indicates how long it takes to collect the average level of receivables. New Wordsallowance method 备抵法uncollectibles n. 不能收回的款项;坏帐receivables n.应收帐款long-term n. 长期(一年以上) account vt. 会计处理write--off n. 销记,划销,转销revenue n. 收入,收益accounts receivable n. 应收帐款credit sales n.赊销notes receivable n. 应收票据current asset n. 流动资产net accounts receivable n. 应收帐款净额approach n. 方法aging of accounts receivable 应收帐款帐龄分析bad debts n. 呆帐,坏帐corresponding adj. 相应的,对应的American Express n. 美国运通卡fee n. 费用internal adj. 内部的,内在的receipts n. (复数)收入creditor n. 债主,债权人compute vt.计算multiply vt. 乘principal adj. 主要的;资本的;本金的negotiable adj. 可转让的,可流通的discount vt. 打折扣,贴现contingent adj.应急的,意外的liability n. 负债payee n.收款人balance sheet n. 资产负债表format n. 形式acid- test ratio 酸性实验比率(以流动负债与流动资产作比较) evaluate v.估价,评价current liabilities n. 流动负债,经常性贷款,短期贷款Text 9 Mechandise Inventory1 Account for inventory by the perpetual and periodic systems. Accounting for inventory plays an important part in merchandisers' accounting systems because selling inventory is the heart of their business. Inventory is generally the largest current asset on their balance sheet, and inventory expense--called cost of goods sold--is usually the largest expense on the income statement.Merchandisers with high-price-tag items generally use the perpetual inventory system, which features a running inventory balance. In the past, most merchandisers handling low-price-tag items used the periodic system. Recent advances in information technology have led to replacement of periodic inventory systems with perpetual systems. A physical count of inventory is needed in both systems for control purposes.2 Apply four inventory costing methods: specific unit cost, weighted-average cost, FIFO, and LIFO. Businesses multiply the quantity of inventory items by their unit cost to determine inventory cost. Inventory costing methods are specific unit cost ; weighted-average cost ; first-in, first-out (FIFO) cost ; and last-in, first-out (LIFO) cost. Only businesses that sell unique items, such as automobiles and jewels, use the specific identification method. Most other companies use the other methods. FIFO reports ending inventory at the most current cost. LIFO reports cost of goods sold at the most current cost.3 Distinguish between the income effects and the tax effects of the inventory costing methods. When inventory costs increase, LIFO produces the highest cost of goods sold and the lowest income, thus minimizing income taxes. FIFO results in the highest income. The weighted-average cost method avoids the extremes of FIFO and LIFO.4 Convert a company's net income from the LIFO basis to the FIFO basis. Companies that use LIFO also disclose FIFO inventory amounts that can be used to convert the company's income to the FIFO basis. LIFO liquidation creates a problem because it increases income taxes.5 Prepare a perpetual inventory record. Some companies combine elements of the perpetual and periodic inventory systems at FIFO cost. Some companies keep perpetual inventory records at weighted-average cost, but few keep such records at LIFO cost.6 Apply to inventory the lower-of-cost-or-market rule. The consistency principle demands that a business stick with the inventory method it chooses. If a change in inventory method is warranted, the company mustreport the effect of the change on income. The lower-of-cost-or-market rule-an example of accounting conservatism--requires that businesses report inventory on the balance sheet at the lower of its cost or current replacement value.7 Compute the effects of inventory errors on the cost of goods sold and on net income. Although inventory overstatements may be counterbalanced by inventory understatements in an adjacent period, effective decision making is aided by accurate inventory information.8 Estimate inventory by the gross margin method. The gross margin method is a technique for estimating the cost of inventory. It comes in handy for preparing interim financial statements and for estimating the cost of inventory destroyed by fire or other casualties.New Wordsperpetual inventory system n. 永续盘存制periodical inventory system n. 定期盘存制merchandiser n. 交易者,买卖者income statement n. 收益表,利润表tag n.标签feature vt. 是...的特色,以...为特色running inventory n. 永续盘存replacement n. 取代count n. 计算specific adj. 具体的,明确的weighted average cost n. 加权平均的成本FIFO(first-in, first out) n. 先进先出法LIFO(last-in, first out) n. 后进先出法unique adj. 唯一的,独一无二的automobile n.汽车,机动车identification n.识别,鉴定distinguish vt. 区别ending inventory n.期末存货income effects n.收益效果,收益的影响tax effect n. 税金,税金影响效果minimize vt. 最小化extreme n.极端,极度convert vt. 使转变,使变换liquidation n.清理,清算,了结lower-of-cost-or market 成本与市场价孰低consistency n.一致性,连贯性stick with 支持,坚持warrant vt.保证,担保conservatism n.稳健主义,保守主义,谨慎性overstatement n. 估值过高,夸大understatement n. 少报counterbalance vt. 平衡,自动抵消estimate vt.accurate adj. 准确的,精确的gross margin n.毛利,销货毛利technique n. 技术,技巧come in handy 派得上用处interim adj.暂时的,临时的,中期的destroy vt. 破坏,摧毁casualty n.(复数)伤亡Text 10 Plant Assets, Intangible Assets, and Related Expenses1 Identify the elements of a plant asset's cost. Plant assets are long-lived assets that the business uses in its operation. These assets are not held for sale as inventory.2 Explain the concept of depreciation. The process of allocating a plant asset's cost to expense over the period the asset is used is called depreciation. The cost of all plant assets but land is expensed through depreciation.3 Account for depreciation by four methods. Businesses may compute thedepreciation of plant assets by four methods: straight-line, units-of-production, and the accelerated methods: double-declining-balance and sum-of-years '-digits. To measure depreciation, the accountant subtracts the asset's estimated residual value from its cost and divides that amount by the asset's estimated useful life. Most companies use the straight-line method for financial reporting purposes.4 Identify the best depreciation method for income tax purposes. Almost all companies use an accelerated method for income tax purposes. Accelerated depreciation results in greater tax deductions early in the asset's life. These deductions decrease income tax payments and conserve cash that the company can use in its business.5 Account for disposal of plant assets. Before disposing of a plant asset,the business updates the asset's depreciation. Disposal is recorded by removing the book balances from both the asset account and its related accumulated depreciation account. Disposal often results in recognition of a gain or a loss.6 Account for natural resource assets and depletion. The cost of natural resources, a special category of long-lived assets, is expensed through depletion. Depletion. Depletion of natural resources is computed on a units-of-production basis.7 Account for intangible assets and amortization. Long-lived assets called intangibles are rights that have no physical form. The cost of intangibles is expensed through amortization. Amortization of intangibles is computed on a straight-line basis over a maximum of 40 years. However, the useful。
