Accounting Question
| MLI |
 Posted: Tue, 11/05/2010 - 4:56am
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My buddy is starting his own business and being an accounting grad he asked me for accounting advice. Unfortunately I only accidently graduated due to some clerical error (?) and I don`t know shit about accounting. Anyway he wants to use his own fridge in the shops kitchen (coffeeshop) and he`s wondering what is better for tax purposes: a) have the business `buy` his fridge for a massive amount, list it as a startup expense and deduction from his future income b) invest the fridge into the business as owner`s equity as an asset and claim the depreciation each year in the future c) other? Thanks poindexters. |
| saint nicholegs |
Posted: Tue, 11/05/2010 - 5:35am
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Unfortunately I only accidently graduated That's just brilliant. |
| joeyjojo |
Posted: Tue, 11/05/2010 - 9:48am
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Unfortunately I only accidently graduated That's just brilliant. Yeah eleborate on this. |
| Hello World |
Posted: Tue, 11/05/2010 - 10:59am
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How did that SAP interview go? |
| San |
Posted: Tue, 11/05/2010 - 11:34am
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How big is the fridge? |
| JohnnyAce |
Posted: Tue, 11/05/2010 - 2:29pm
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My buddy is starting his own business and being an accounting grad he asked me for accounting advice. Unfortunately I only accidently graduated due to some clerical error (?) and I don`t know shit about accounting. Anyway he wants to use his own fridge in the shops kitchen (coffeeshop) and he`s wondering what is better for tax purposes: a) have the business `buy` his fridge for a massive amount, list it as a startup expense and deduction from his future income b) invest the fridge into the business as owner`s equity as an asset and claim the depreciation each year in the future c) other? Thanks poindexters. I am not expert in accounting but I would say (B) with a caveat. Try and depreciate the asset (in this case the fridge) in as few years as you can (one year if you can pull it off). That way there is no impact on your first year EBITDA (only the FCF), but you pay less taxes (as your first year EBIT is significantly reduced by the depreciation on the fridge). Now this is a one off benefit that you get in year one. In the future you will have less depreciation and will have higher EBIT, compared with depreciating the asset over longer period. However, since present value of future cash flows is discounted (discounting future cash flows by Weighted Average Cost of Capital to get to present value), you'll find rapidly depreciating the asset would be of benefit in the long run. My 2 pence. |
| MLI |
Posted: Wed, 12/05/2010 - 12:31am
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thanks Johnny Ace, a fair reply http://rogueeagle23.blogspot.com/ |
| phelen |
Posted: Wed, 12/05/2010 - 12:33am
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Unfortunately I only accidently graduated due to some clerical error (?) and I don`t know shit about accounting. |
