"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.

There is a vast misunderstanding of how depreciation works, what pre-paid
expenses are (read the original post again), what "reserves" are, etc.