Accelerated depreciation is a method for allocating the cost of an asset in a manner that provides greater deductions in the earlier years of the asset's life. This method is advantageous for tax purposes, offering businesses the opportunity to defer tax payments.
A Balance Sheet is a financial statement that presents the financial position of a company at a specific point in time. It details the company's assets, liabilities, and shareholders' equity, ensuring that the assets are balanced by the sum of liabilities and equity.
A capital asset as defined in Section 1221 of the Internal Revenue Code (IRC) that receives favorable tax treatment upon sale contains various exclusions such as inventory, property held for resale, property used in a trade or business, certain copyrights, and specific U.S. government obligations.
The term 'Cash Out' refers to the process of completely liquidating an asset, enabling the owner to receive its total monetary value in cash.
A financial statement is a formal record of the financial activities and position of a business, person, or other entity, revealing the income, expenses, assets, liabilities, and equity.
Incorporating refers to the process of forming a corporation under state regulations or providing a geographic area with the legal status of a political subdivision. Incorporation can protect personal assets by limiting liability to the assets owned by the corporation.
Liquidity refers to the ease with which an asset can be quickly converted into cash without significantly affecting its market price. This concept is crucial in financial and real estate contexts, as it influences the ability to sell assets promptly and efficiently.
Prepaid expenses refer to amounts that are paid in advance for goods or services to be received in the future. These expenses are recorded as assets until they are consumed, at which point they are expensed on the income statement.
