Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

3. Accrual Accounting Concepts

Introduction to Adjusting Journal Entries and Prepaid Expenses

Financial Accounting

3. Accrual Accounting Concepts

Introduction to Adjusting Journal Entries and Prepaid Expenses

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Multiple Choice

What is the process of allocating the cost of natural resources to expense as they are used?

Depletion

Accrual

Amortization

Depreciation

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Verified step by step guidance

Understand the concept: Allocating the cost of natural resources to expense as they are used is referred to as 'Depletion.' This term is specific to natural resources such as oil, gas, minerals, and timber.

Recognize the difference between related terms: 'Depreciation' applies to tangible fixed assets like machinery and buildings, 'Amortization' applies to intangible assets like patents and copyrights, and 'Accrual' refers to the recognition of revenues and expenses when they are incurred, not when cash is exchanged.

Learn the formula for depletion: The depletion expense is calculated using the formula: \( \text{Depletion Expense} = \frac{\text{Cost of Natural Resource} - \text{Residual Value}}{\text{Estimated Total Units}} \times \text{Units Extracted} \).

Apply the formula: To allocate the cost of natural resources, determine the total cost, subtract any residual value, divide by the estimated total units of the resource, and multiply by the units extracted during the period.

Review the accounting treatment: Record the depletion expense in the financial statements by debiting the depletion expense account and crediting the accumulated depletion account, which reduces the book value of the natural resource.