Concepts guide - Depreciation

[David Harrison]

On Wed, 27 Oct 2004 13:11:09 -0300, Jon Lapham <lapham at jandr.org> wrote:

> I like your text, except that it seems to be very tax oriented.  If I
> (as an individual) buy a new car, I may want to track the car's
> depreciation, so that I have an estimate of my personal net worth for
> any given year.  No tax implications, just simple book depreciation.

I think the distinction is more business versus non-business, rather
than tax versus book.  The reason why I say that is because most small
businesses actually follow the tax law when it comes to depreciation. 
This minimizes the difference between financial statement income and
tax income.  For the person interested in tracking their net worth, I
think that's almost another topic (but related to this one).

> 
> I'm thinking we should introduce the concepts of book versus tax
> depreciation.  Agree?

Yes, maybe the introduction should be in two sections.  One for the
person doing the books for their personal record keeping, and the
other for the person doing the books for their small business.
> 
> I found this:
> http://coen.boisestate.edu/mkhanal/deprecia.htm

That's close to what I said.  I see the point about tax versus book
depreciation.  I'll work that in.  I hesitate to get too much into
taxes though, as each country would have different rules.
> 
> Another idea I have is that maybe we should have a list of terms and
> definitions?  Here are a few, any others?
> 
> Book depreciation:
> Tax depreciation:
> Cost basis: cost of the capital item plus incidental costs
> Salvage value:

I can't think of any more off the top of my head, but I'll define
these and if more come up I'll add them to the list.

Let me do a rewrite and get back to you.

Dave