RFC: Chapter 8 Tutorial/Guide

[Chris Lyttle]

On Fri, 2003-07-11 at 06:29, Jon Lapham wrote:
> Rewrite:
> Asset appreciation occurs when something you own increases in value over
> time.  When you sell this asset for more than you paid, the difference
> is known as "capital gains".  An example of an asset from which you
> could receive capital gains is a stock.  The accounting methods for
> handling asset appreciation differs somewhat from depreciation because
> usually you are only concerned with the moment you sell the asset and
> receive capital gains (as opposed to the continuous nature of tracking
> depreciation).  Governments tend to be quite interested in taxing
> capital gains in one manner or another. (As always, there are
> exceptions. If you hold a bond that pays all of its interest at
> maturity, tax authorities often require that you recognize interest each
> year, and refuse this to be treated as a capital gain.)
> 
> better?
> 
Seems so to me at least :)

> So, in other words, you have 2 asset accounts.  One is the asset with 
> the value fixed at the purchase price (and never changes value), and a 
> second with an increasing-with-time negative value to reflect the 
> depreciation.
> 
> Something like this:
> 
> -Assets           + $300
>    -Computer       + $1500   <- the "asset cost" account
>    -Computer depr  - $1200   <- the "accumulated depreciation" account
> -Expenses
>    -Depreciation   + $1200   <- the "depreciation expense" account
> 
> For me, it seems that the "depreciation expense" account is always equal 
> (but opposite sign) to the "accumulated depreciation" account... in this 
> simple example anyway.

Well that was my initial thinking, Matthew pointed out some obvious
flaws in my reasoning :) The above seems to correctly allocate
depreciation expense, but I'm not sure how to track the depreciation.

Chris
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