They are recorded on your books as expenses, just like any other company expense. But instead of coming out of company's cash, you must record a liability, such as loans payable to director/partner in the amount of the total expenditures that you made for the start up.smartcard wrote:I started a small company about an year ago, and the year end financial reporting are due now.
Before the start up of business, I have expenses related to this business, such as buying of Software, Development of my website etc., I need to know how I can record this in my company accounting. These payments were not paid from the company bank account.
There are. Google to find them. But if you have any transaction volume at all you will want to purchase an accounting package.I also need to know if there are any standard Excel templates that I can maintain the accounts, Balance Sheet and P&L?
Many thanks for this input, I don't have receipts or proof of payments for some of these expenses with me now. Is it okay? or I need to show proof like invoices and payment slips etc?Strong Eagle wrote:They are recorded on your books as expenses, just like any other company expense. But instead of coming out of company's cash, you must record a liability, such as loans payable to director/partner in the amount of the total expenditures that you made for the start up.
The advantage of this is when the company starts to make money, you pay your loans off first, so it is not income to you.
Maybe... most software and website development costs can be written off in the first year without needing to amortize the expense. PC's amortize over 3 years. Much better to just expense out whenever possible.livingontheedge wrote:The items you mentioned above appears that they would be asset in nature, capitalised and subsequently depreciated/amortised over their useful lives.
If you have no supporting docs to verify the purchase and cost of the asset, you would atleast need to establish the asset exists and used primarily for the Company's principal activities. The amount can be estimated and substantied via replacement cost method, with subsequent depreciation/amortizaton.
According to GAAP, the whole point of the depreciation exercise is to ensure that expenses are matched to revenues. Thus, if you buy a $10,000 widget maker with a life span of 5 years, it is depreciated 20 percent per year so that the cost of the machine is factored into the unit cost of your widgets.livingontheedge wrote:SE - your logic makes sense - it would generally be how the Business Owners view it. But from an accounting and taxation angle, for the purposes of dicussions, expensing it directly will muck up the presentation and disclosures of the FS - the BS, PL and disclosures - and also the Income Tax filing.
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