Re: Question re. Business Income Statements

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Posted by Ken Holmes on August 12, 2008 at 02:30:53:

In Reply to: Re: Question re. Business Income Statements posted by IB (NJ) on August 11, 2008 at 15:53:20:

IB

That's exactly what I do. I list a property when purchased as an asset, and then any check written towards that property during the hold period I put into that asset account - repairs, loan costs, interest, utlities, etc. When sold, that total number in the asset is coverted into COGS. The only exception for this is at years end. I use a calendar year, so on 12/31 I may make a journal entry converting any asset items that are not hard property costs such as interest, insurance and utilities into expenses for that year, so I can go ahead and deduct them. In other words, if a property is purchased in October, in December I expense out what I can and deduct it, rather than leaving it in an asset.

So, there are 3 categories:

1. Asset - purchase price and repairs
2. Expenses such as interest and utlities, insurance
3. Cost of goods sold.

For items in number 2, you may deduct in the year you write the check, or leave in the asset category until sold, then converting into COGS. Yes, the income is 150K, offset by the asset (converted into COGS) and any expenses not already deducted.

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