First, we'll hear a short article introducing the topic.

Then we'll go over each word in detail with some example sentences.

To show you how you can use the words at the end of the video, you'll have a chance to review and practice your new vocabulary.

The rules of Gap also require conservative methods of calculating a company's value, for example, by using third parties to appraise assets whose value may be uncertain by depreciating the value of fixed assets at a standard rate and by recording capital gains and losses as they occur.

This helps prevent managers from being too optimistic in stating a company's equity on the balance sheet.

Like the rules on recording income and expenses, the rules on asset valuation reflect the principle of prudence, a basic component of gap.

Now we'll go through each word in detail with some example sentences to show you how you can use the vocabulary to appraise, to appraise, to appraise, means to estimate or calculate the value of an asset such as a house or building.

We plan to sell some of the unused land near our factory, so I've made arrangements to get it appraised.

Appraisal Appraisal Appraiser APPRAISER An appraisal normally means an estimate made by 1/3 party or appraiser who is independent of the company and can give an objective opinion appraised value.

Appraised value.

The figure produced by the appraiser is known as the appraised value.

Since property prices have fallen substantially, we need to record our property holdings at their appraised value, not at the original purchase price.

To depreciate.

To depreciate.

To depreciate means to reduce the value of a company asset recorded on its balance sheet.

Since most assets, like machinery, will wear out or become obsolete over time, it can be misleading to record these assets at their original value.

Most of our company trucks still work fine, but we're no longer carrying them on the books because they've been fully depreciated.

Depreciation.

This reduction in value, known as depreciation, is one important form of non operating expense and needs to be deducted in order to calculate a company's net income to write down to write off.

We can also use the expression to write down meaning to reduce the recorded value of an asset or to write off, meaning to reduce the value to zero.

We managed to reduce taxes by writing down the London office as property values have dropped.

Straight line depreciation gap provides standard rules for depreciating many assets.

When common method is straight line depreciation, in which the value of an asset starts at its original purchase price and falls to zero in fixed steps over a certain number of years.

Many company accounts use a five year period for straight line depreciation of equipment.

Capital gain.

A capital gain is income earned when the price of an asset increases.

For example, when shares held by a company or individual rise on the stock market capital loss when the price of an asset fulls, the result is a capital loss.

Investment banks have sustained heavy capital losses on their holdings of company shares as markets have fallen around the world.

Equity Shareholders Equity Equity, or shareholders equity means the net value of a company to its shareholders.

It is calculated by adding up the value of the company's assets and then subtracting the value of its liabilities.

Shareholder equity in this firm has dropped to almost zero as the company sold off assets and took on additional debt.

Home equity home equity owners of houses and apartments are also said to have equity or home equity, meaning the value of the property minus any outstanding mortgage debt.

If the price of a house falls below the value of the mortgage, the owners are said to suffer from negative equity.

Owners of homes with negative equity often abandoned their properties instead of continuing to make mortgage payments prudent.

Cruden being prudent or showing prudence means being careful or cautious in one's activities, especially by planning ahead for the future.

It might be prudent to identify some alternative suppliers in case we run into problems with our current supplier principle of prudence.

Principle of prudence.

The principle of prudence requires companies to make their financial statements as conservative or pessimistic as possible.

The principle of prudence helps ensure that if there are surprises in a company's future, which its accounts failed to show, these are more likely to be good news than bad news.

These projections assume that sales growth will be much faster in future than over the past five years, which seems to conflict with the principle of prudence.

Now it's your turn to practice some of the words we have studied in this episode you'll hear a Siris of sentences with the word blanked out or replaced with a B.

Repeat the whole sentence.

But say the missing would, For example, if you here operating have been cut substantially since we closed all our overseas officers, you should say operating expenses have been cut substantially since we closed all our overseas officers.

We'll play an example.

Answer after each exercise.

Are you ready?

Let's begin.

Value of this property has more than doubled since we bought it.

Answer.

The appraised value of this property has more than doubled since we bought it.

Most of my taxable income last year came from gains on the shares I sold.

Answer.

Most of my taxable income last year came from capital gains on the shares I sold.

Way managed to reduce taxes by down the London office as property values have dropped.

Answer.

We managed to reduce taxes by writing down the London office.

As property values have dropped, shareholders in this company has been wiped out by its recent investment losses.

Answer.

Shareholders equity in this company has been wiped out by its recent investment losses.

This concludes out two part series on general accounting vocabulary.

You can visit the website at www dot business English pod dot com to watch and download lots more videos on business English.