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> They would likely by $166 lower (assuming 3-year straight line depreciation). Only if they consider it as an asset, in which the $500 moves from the 'liquid

> They would likely by $166 lower (assuming 3-year straight line depreciation). Only if they consider it as an asset, in which the $500 moves from the 'liquid assets' column to the 'fixed assets' column and is then depreciated away over time at $166 per year. The other method of accounting is to immediately deduct that $500 from assets as a cost in the year of acquisition. There's then no need of depreciation or spreading over several accounting years. Any residual value gained by resale at the end of the printer's life can then re-enter the accounts by means of 'other income'.

SilasX 10y ago
I'm no accountant, but I'm pretty sure a business doesn't have unlimited discretion to accelerate depreciation on equipment they buy, deferring or eliminating taxes (due to lower effective profit).
- rahimnathwani 10y ago
  dingaling is technically correct, even though the point s/he makes is irrelevant to mine. Companies do have discretion about their own accounting policies, e.g. about whether to expense printers in the year of purchase, or over how many years to depreciate them. Regarding your tax point, your country probably has rules about what can/cannot be deducted from profits. Complying with those rules may require a different calculation of profit. So your company's 'profit' may differ between your accounts and the accounts you use to calculate your corporation tax.
  - SilasX 10y ago
    To follow up -- I understand why, for business purposes, you may have your own theories about how fast something is depreciating. I was responding to the parent's implication that you can somehow, at a whim decide, "oh, that thing I just bought is worthless so I can deduct 100% of its cost immediately and report lower taxable profits". No, the tax laws stipulate in which cases you can do that, and you generally don't have discretion, except perhaps by taking on some other downside.

SilasX 10y ago

I'm no accountant, but I'm pretty sure a business doesn't have unlimited discretion to accelerate depreciation on equipment they buy, deferring or eliminating taxes (due to lower effective profit).

rahimnathwani 10y ago
dingaling is technically correct, even though the point s/he makes is irrelevant to mine. Companies do have discretion about their own accounting policies, e.g. about whether to expense printers in the year of purchase, or over how many years to depreciate them. Regarding your tax point, your country probably has rules about what can/cannot be deducted from profits. Complying with those rules may require a different calculation of profit. So your company's 'profit' may differ between your accounts and the accounts you use to calculate your corporation tax.
- SilasX 10y ago
  To follow up -- I understand why, for business purposes, you may have your own theories about how fast something is depreciating. I was responding to the parent's implication that you can somehow, at a whim decide, "oh, that thing I just bought is worthless so I can deduct 100% of its cost immediately and report lower taxable profits". No, the tax laws stipulate in which cases you can do that, and you generally don't have discretion, except perhaps by taking on some other downside.