RFC: Chapter 8 Tutorial/Guide

[Perry Smith]

On Friday, Jul 11, 2003, at 23:11 US/Central, Chris Lyttle wrote:

> 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.)

My suggestion is to remove the paren's.

>>
>> 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
>>

The suggested method by the Quickbooks manual is three accounts.  
Something like:

Assets $10
   Printer $10
     Cost $100
     Depreciation -$90

The cost and depreciation are input values.  The 'printer' and "assets" 
are sums of the accounts below them.

I'm not sure what Chris is asking about "how to track the depreciation".

Perry

>>    -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
> -- 
> RedHat Certified Engineer #807302549405490.
> Checkpoint Certified Security Expert 2000 & NG
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