Asset appreciation?

[Mike or Penny Novack]

On 3/24/2017 2:56 PM, Manolis Karamousadakis wrote:
> Hello, I have a -maybe stupid- question but I cannot find the answer in the
> web.
> I would appreciate if you can help me clarify this!!!
>
> My undestanding is that when you buy an fixed asset with cash you debit
> your Asset Cash account and credit  your Fixed Asset acount.
> But how do you property account when you buy something that was way too low
> priced?
Where are you? << what are the accounting rules for your jurisdiction >> 
Even were we qualified to give accounting advice (we are not) that 
information would be necessary.

Here in the US -- the increase in value of that shed  because your labor 
changed the materials into the shed does not count (does not change the 
basis). If you paid somebody to build the shed for you, you could add 
that to the basis of the shed (and should) instead of considering it an 
expense. Similarly with that solar array, the basis is what you paid for it.

Normally you would NOT want to recognize the appreciation as income (be 
taxed on that income as income) but rather take it as a capital gain 
later (generally a lower rate).

In any case, for deciding what your net worth might be where property is 
involved, that banker should not be going by your book value for it but 
an assessed value.

Michael D Novack