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Client Name, LP

Client Name, LP. Accounting Procedures: General Asset Accounts. General Information. Available for assets placed in service: In same year With same asset class With same depreciation method With same recovery period, and With same convention Treated as single asset for depreciation.

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Client Name, LP

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  1. Client Name, LP Accounting Procedures: General Asset Accounts

  2. General Information • Available for assets placed in service: • In same year • With same asset class • With same depreciation method • With same recovery period, and • With same convention • Treated as single asset for depreciation

  3. Advantages of Using GAA • Simplified receipt of assets • Simplified bookkeeping • Simplified disposition of assets • Simplified tracking of assets for accounting and tax purposes • If any assets are disposed of during a year, depreciation continues unchanged • Section 179 expensing still available • Eliminates need to track individual components of devices

  4. Disadvantages of Using GAA • Any dispositions before end of life of the GAA are recorded as the sale of an asset with a ZERO adjusted basis – all proceeds included in taxable income • Proceeds taxed as ordinary income / depreciation recapture • No losses allowed • Election required each year on tax return for assets placed into service that year

  5. Procedures • Each invoice for purchase of devices segregated into: • GAA for that year • Items to be expensed, ie, templates • GAA items booked into Fixed Assets in QuickBooks with date designation • Depreciation booked at end of year, quarterly or monthly

  6. QuickBooks Changes • Some account name changes • Separate accounts for office equipment, computers, leasehold improvements, etc. • “Device” GAA parent account • GAA subaccount with year designator • Devices:2005 • Devices:2006 • Separate Excel spreadsheet or database to track serial numbers in particular year

  7. GAA Example • Assumptions • Units placed into service this year: 200 • Cost per unit: $125 • MACRS recovery period: 5 year • Convention: Half-year • Disposition of 75 units in Yr 2 for $50/unit • Disposition of remaining units in Yr 4 for $40/unit

  8. Depreciation Comparison

  9. Comparison of Year 2 Sale

  10. Comparison of Year 4 Sale

  11. Comparison of Taxable Income

  12. Summary • Simplifies device acquisition and accounting • Over time, net taxable income using GAA identical to tracking discrete devices and/or components • Significant time savings • No need to change current device tracking methodology

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