On Fri, 29 Oct 2004 18:30:46 -0300, Jon Lapham <[EMAIL PROTECTED]> wrote:
Well, I think it is better to be accurate/complex than simple/wrong. So, I changed the definition to your "...expensing capital purchases over time...".
Just nit-picking, but shouldn't it be "Depreciation is the accounting method..." not "account method".
Yup. Fixed.
Oh, I forgot to ask before. The definition of "Book depreciation" should mention something about accurately reflecting resale value? (as opposed to "tax depreciation") Or is that not true?
No, book depreciation has nothing to do with resale value. Let me try an example.
You purchase a computer for $1000.00. Estimated useful life 5 years with no salvage value. For financial statement purposes you decide on straight line depreciation. The "book depreciation" is then is $200.00 per year.
Ah, okay, so then the definition should mention something about "per period"? I do not like this wording... suggestions? The problem with the current definition is that it could be interpreted to mean the total depreciation, $1000 in the example above.
One other confusion I have with book depreciation. In the depreciation schemes section we say "...for tax purposes, you will need to depreciate your assets at a certain rate. This is called tax depreciation. For financial statement purposes you are free to choose whatever method you want. This is book depreciation." So, shouldn't this distinction also be made in the definition of book depreciation?
Current:
Book depreciation - this is the amount of depreciation that you record in GnuCash.
Proposed:
Book depreciation - this is the amount of depreciation that you record in your finiancial statements per depreciation period.
Try this:
"As opposed to personal finance where the goal is tracking personal worth, business is concerned with matching the expense of purchasing capital assets with the revenue generated by them. This is done through book depreciation. Businesses must also be concerned with local tax laws covering depreciation of assets. This is known as tax depreciation. The business is free to choose whatever scheme it wants to record book depreciation, but the scheme used for tax depreciation is fixed. More often than not this results in differences between book and tax depreciation, but steps can be taken to reduce these differences."
Looks good to me. I put your text in.
If you use this, then I would get rid of the second paragraph in that section as it is somewhat redundant. The "steps that can be taken..." sentence may need further explaining, but I did touch on that in the last sentence in the first paragraph in the Depreciation Schemes section on http://www.gnucash.org/docs/v1.8/C/gnucash-guide/dep_value1.html. Basically, the step is to choose the same methods for book and tax depreciation.
Okay, I removed the second paragraph, let's see how that reads.
These changes have been sent to the web page: http://www.gnucash.org/docs/v1.8/C/gnucash-guide/dep_concepts1.html
-- -**-*-*---*-*---*-*---*-----*-*-----*---*-*---*-----*-----*-*-----*--- Jon Lapham <[EMAIL PROTECTED]> Rio de Janeiro, Brasil Personal: http://www.jandr.org/ ***-*--*----*-------*------------*--------------------*---------------
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