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John has a choice between 2 apartments. John rents apt A for $800/mo instead of Apt B which is exactly the same but costs $1000/mo. Therefore john has saved $200 in monthly rental costs.
using GAAP, recording the expense is easy:
rent expense $800
cash $800
But how can I record the $200 in savings? Yes I know this is NOT GAAP compliant. But I still want to saving to appear on my balance sheet
Does this work?
Savings Asset $200
"Savings Income" $200
Income statement
"savings income" $200
rent expense 800
ni -600
balance sheet
asset : savings $200
Paid in capital $800
retained earnings -600
eq 200
OR
Paid in capital $800
retained earning -800
"savings income" 200 (or call this account "economic savings")
eq 200
So John spent $800 of his $800 in Paid in capital and now has $0 in cash, but would still be $200 ahead (hence $200 equity) relative to renting apt B. I know this is unusual but would appreciate input.
using GAAP, recording the expense is easy:
rent expense $800
cash $800
But how can I record the $200 in savings? Yes I know this is NOT GAAP compliant. But I still want to saving to appear on my balance sheet
Does this work?
Savings Asset $200
"Savings Income" $200
Income statement
"savings income" $200
rent expense 800
ni -600
balance sheet
asset : savings $200
Paid in capital $800
retained earnings -600
eq 200
OR
Paid in capital $800
retained earning -800
"savings income" 200 (or call this account "economic savings")
eq 200
So John spent $800 of his $800 in Paid in capital and now has $0 in cash, but would still be $200 ahead (hence $200 equity) relative to renting apt B. I know this is unusual but would appreciate input.