Without looking at the actual accounting rules (GAAP or otherwise) used by WeWork it is difficult to say how the line costs are treated. In your example, you h

Without looking at the actual accounting rules (GAAP or otherwise) used by WeWork it is difficult to say how the line costs are treated. In your example, you have treated $1200 as an expense. Lot of companies tend to capitalize these expenses (for example "deferred commissions" on Salesforce B/S). So, they will create a reserve on the Balance sheet of $1200, then decide on the useful life of the said expense and depreciate it on the P&L. Let's say WeWork thinks the useful life of the $1200 expense is 24 months. The calculation will work like this: P&L Month 0: Depreciation Expense 0, Revenue 0 and Profit 0 Month 1: Depreciation Expense $50, Revenue $100 and Profit $50 Month 2: Depreciation Expense $50, Revenue $100 and Profit $50 so and so forth BS Month 0 - Asset $1200 Month 1 - Asset $1150 (Depreciation $50) Month 2 - Asset $1100 (Depreciation of another $50)