You have been such a big help answering all my questions. I just have one more question to ask.
I purchased an asset for my business. I financed the purchase under my name. But it’s 100% used for my business. Instead of depreciating the item over 5 years, im planning on expensing the whole purchase for this year. I’m not sure how to have this reflected on my income statement and my balance sheet. From my understanding, I need to list it as a fixed asset on my balance sheet. Is that correct?
create the asset account & create a sub account for accumulated depreciation
then use an expense entry
line one - the asset account and the amount
line two - equity investment and the same amount as a negative
save the zero total expense
At tax time to expense the asset you do a journal entry
debit an expense account for the amount of the asset
credit the asset accumulated depreciation account for the same amount
the above assumes of course that the amount you paid is within the de minimus amount or falls under the section 179 accelerated depreciation rules
The asset sits on the books at cost less the accumulated depreciation, effectively zero value. The reason it sits there is because you may sell it some time in the future and there is a scrap value that would be income at that point since the effective cost is zero.