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Unformatted text preview: sets. Assets are goods and documents that have transferable value.
Assets make the company’s balance sheet look better. However, given a choice, most companies
prefer to deduct their purchases as expenses rather than store them up as assets. For example, in HURDLE: THE BOOK 6.6 ON BUSINESS PLANNING the United States a computer purchase can be treated either as an asset or an expense, depending
on conditions set forth in federal tax law. When you can choose, you normally want to expense your
purchases because then you can deduct those expenses from income. This is why we have “Expensed
Computer Equipment,” a piece of expensed equipment, among the expenses in our example.
The table shows some common types of start-up expenses, such as legal costs, stationery, and
brochures. One category that frequently generates questions is ofﬁce equipment, such as computers
and telephones, that the tax authorities allow a business to report as expenses. While these purchases
might normally be assets, they are more often expensed for start-ups because that reduces taxable
income, and the U.S. government allows using them as expenses instead of assets.
Product development expenses cause some confusion because some people want to make them
assets, but they are almost always expenses. The trouble is that although you’d like to think of product
expense as developing future assets, that’s not the normal tax treatment.
The second portion of the sample start-up table estimates the assets your business will have at startup, including starting cash, inventory (except for service companies), and others. The example shows
just two categories, cash and other short-term assets, because it was taken from a service company
that had no starting inventory requirements. Ofﬁce furniture, shelving, and signage are often start-up
assets. The total in the example is $32,000.
Your starting cash is your most critical input. Don’t expect to get it right the ﬁrst time without
adjustments. Normally you start with an educated gue...
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This note was uploaded on 01/26/2014 for the course BUINESS 102 taught by Professor Unknown during the Winter '09 term at University of Phoenix.
- Winter '09