http://www.norwalk-cpa.com/what-small-business-accounts-should-i-post-assets/ A Norwalk, CA Accounting Groups Sun, 21 Mar 2010 02:48:14 +0000 hourly 1 http://wordpress.org/?v=abc http://www.norwalk-cpa.com/what-small-business-accounts-should-i-post-assets/comment-page-1/#comment-1581 Account? Fri, 29 Jan 2010 13:39:28 +0000 http://www.norwalk-cpa.com/what-small-business-accounts-should-i-post-assets/#comment-1581 All materials were likely in the inventory. Those will have to be taken out of the inventory as a "markdown", or a "shortage". I prefer "markdonwn" as this is a known factor, and does not become unknown, as shortages are. This reduces the Asset, "Inventory". The labor involved will just have to be absorbed, which increases your total labor expenses. This will be picked up in the Asset account as well. Then a credit is entered to "Depreciable Assets", increasing that account/amount.. The value of this asset will include the materials and labor. When this is done, expenses will "increase", resulting in less profit, while Assets will also increase. The networth, bottom line, of the business will actually remain the same, since assets offset the "loss" of material and labor. When a depreciable asset is aquired, as this is, a "Depreciation Schedule" should be set up, just as any asset. Each month, during the term of the schedule, an amortized amount is posted to the Depreciation Expense, as any other operating expense. The value of the asset decreases each month, as all others do. The term schedule is determined by the estimated life of the asset. The depreciation is an expense, in reality, recuperating the cost of an asset for future replacement. This also reduces tax liability, by reducing actual profits. All materials were likely in the inventory.
Those will have to be taken out of the inventory as a “markdown”, or a “shortage”.
I prefer “markdonwn” as this is a known factor, and does not become unknown, as shortages are.
This reduces the Asset, “Inventory”.
The labor involved will just have to be absorbed, which increases your total labor expenses. This will be picked up in the Asset account as well.
Then a credit is entered to “Depreciable Assets”, increasing that account/amount..
The value of this asset will include the materials and labor.
When this is done, expenses will “increase”, resulting in less profit, while Assets will also increase.
The networth, bottom line, of the business will actually remain the same, since assets offset the “loss” of material and labor.
When a depreciable asset is aquired, as this is, a “Depreciation Schedule” should be set up, just as any asset.
Each month, during the term of the schedule, an amortized amount is posted to the Depreciation Expense, as any other operating expense.
The value of the asset decreases each month, as all others do.
The term schedule is determined by the estimated life of the asset.
The depreciation is an expense, in reality, recuperating the cost of an asset for future replacement. This also reduces tax liability, by reducing actual profits.

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