Just my little $.02, about the above statement. Depreciation is always an expense, and recognizable as such for tax purposes. The IRS really doesn't care about chrome wheels, etc (unless, are they tax deductible?). Thus, the Depreciation Expense account would be strictly for recording your depreciation, and not for recording the little extras you buy.
So, do you think the following account structure is correct:
-Assets + $300 -Computer + $1500 <- the "asset cost" account -Computer depr - $1200 <- the "accumulated depreciation" account -Expenses -Depreciation + $1200 <- the "depreciation expense" account
in which Expenses:Depreciation is always the mirror of the accumulate depreciation account?
Repairs on cars, or houses, or buildings, would go into a maintenance expense account. Chrome wheels and little blue neon lights would go into a "feel good" expense account (that you can consider when trying to sell the vehicle). Capital improvements (e.g., a new driveway, or a new engine for your airplane, or renovating your warehouse) would go to a capital improvements account, with the resulting appreciation going to an appreciation (unrealized gains) account.
I like this. Much simpler. If I understand, this keeps capital improvements separate from you "asset cost" and "accumulated depreciation" accounts. Much easier to follow.
At least, that's the way I learned it in accounting class....and antique and show cars may rate as a capital investment. ;)
Different accountants do things differently. As long as it all balances, and satisfies the tax man, it probably doesn't matter, But for a tutorial, you probably want to make sure you stick to the GAAP. You can find a copy at your local bookstore, probably.
Right, but I think we should (in the users guide anyway) try to stick to one method. This stuff is complicated enough for newbie pretend-accountant (ie: me) without mixing in the different ways of doing things...
Maybe after I get this chapter written using one method, I can add a final section which demonstrates other methods...
-- -**-*-*---*-*---*-*---*-----*-*-----*---*-*---*-----*-----*-*-----*--- Jon Lapham <[EMAIL PROTECTED]> Rio de Janeiro, Brasil Work: Extracta Moléculas Naturais SA http://www.extracta.com.br/ Web: http://www.jandr.org/ ***-*--*----*-------*------------*--------------------*---------------
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