depletion versus depreciation

Because the tax preparation software that Quickbooks assumes you want to import the trail balance into maintains all the fixed asset information and depreciation calculations. Assigning a line for depreciation would serve no purpose.

In Canada, the tax line is called "Amortization", not depreciation. I don't know about other countries. This is standardized terminology in the "GIFI" (General Index of Financial Information) that is mandatory for use in Canadian corporate tax reporting. Accountants generally consider that "amortization" is more generalized than "depreciation"; the latter is generally used only when referring to the regular write-off of the cost of "tangible" assets over a period of time, while the former may refer to either tangible or intangible assets.

I don't know about other countries, but Allan's answer is incorrect for Canadian users.

(deductions:depletion) but

information and

If the OP was using the Canadian version of QB he probably never would have posted the quesion in the first place.

Just a point of information, the USA versions do not have a separate tax line assignment called "Amortization", this type of expense would normally get assigned to the tax line "Other Deductions".

This is odd because there is a Depreciation line on Schedule C (line 13). This is in addition to the Depletion line (line 12). Depletion is the using up of natural resources by mining, quarrying, drilling, or felling so most ordinary assets would be using the Deprecation line instead of the Depletion line on the tax return.

Since QB does not have a Depreciation tax line just use the Depletion line that is available. Just make sure that your report it on the Depreciation line on the tax form.

As to how to enter depreciation, just use a general journal entry to debit Depreciation expense and credit Accumulated Depreciation for that asset.

What if I have thoudsands of assets? Do I make a journal entry for each one?

You could make one large journal entry that hits several accounts at once. That's how we handle it. Our backup detail is contained in an excel spreadsheet that details our assets. In our case we had the assets broken out by school location both on the Accumulated Depreciation as well as the Depreciation expense accounts but used one JE to book it at the end of the year.

I have no idea, but I have a good story.

Several years ago I was invited to invest in a "sand pit" (it's a hole in the ground from which sand is removed). Sand is a mineral subject to the tax dodge of "depletion." As you use up an asset like minerals, you get a "depletion" tax deduction to offset the sale of the sand.

Ultimately, according to the person offering me the investment opportunity, you end up with one big honkin' hole. You then transfer the hole to another corporate entity you set up and being selling "dumping rights" to people who want to dispose of things like concrete, tree stumps, building materials, etc. As the hole fills up, you again get to "deplete" the resource (the hole) - again, another substantial tax deduction.

In the fullness of time, the hole is filled. You then cover the thing with a foot or so of clay and topsoil and sell the property to a developer of low-cost housing.

I declined the investment opportunity.

I will try your method. How can I increase the font size to make the entry large?

Change your screen resolution.

You certainly would save yourself some typing if you use excel to summarize the assets and their associated deprecation. Then just book a summary entry as 1 line per account. Don't try and enter it by asset.

How do I make the entry when I sell the assets? It gets very busy in the store and if the counter person has to also use excell every time a customer buys something the lines will get very long.

Are you talking assets or are the items really inventory? Assets would generally be your machinary, furniture, computers, equipment and other stuff used to run the business. They are items that you would generally keep for the life of the item. They generally are not sold to customers except on rare occasions. You also do not depreciate inventory.

Thanks Laura,

Its getting towards the end of Tax Season and the tension is starting to take its toll on my brain. I should have been an astronaut instead of a CPA. Its a good thing I have this Usenet to unwind in.