Matt Barrow wrote:
"Ron Natalie" wrote in message
m...
Matt Barrow wrote:


AIR, you have a reserve to pay a KNOWN FUTURE expense. This is
distinct from a CAPITAL account which is set aside to buy a CAPITAL
ASSET in the future.

That's all accounting practice, but it has no bearing in regard to
taxes. If you got money in the bank, it is an asset. If it derives
interest, it's income. It doesn't matter what you consider it to be
for use.

As one put it, this is different still from a sinking fund which
is, IIUC, how depreciation is handled when a depreciable item will
have to be replaced when it's useful life is ended.

None of which has squat to do with taxes.

Really? Depreciation is not a yearly write off against income?

In a way, you're right though - Businesses do two different
accountings, one for financial reporting and another for taxes. As an
example, Inventory can be LIFO in one, and FIFO in the other.

The discussion was how a pre-paid asset is accounted for. That
derived from "XL builder" saying that companies could avoid taxes by
listing future expenses (not yet incurred) as pre-paid. Demonstrating
what a pre-paid expense is was the point of showing the fallacy of
his position.

I was using the that as an example of what someone could NOT do. Hell, Matt
I was agreeing with you.

The poster was saying it was a an expense that just hadn't been distrubuted
yet. I was saying it deosn't matter and used the widget to show grossly why
it wouldn't work.