USA Booking ghost assets


Joined
Feb 23, 2014
Messages
2
Reaction score
0
Can anyone help me figure out for my client how to record assets that mysteriously got forgotten. New client went back through asset list and indicated at least $20K of assets they purchased over the years with "cash" and they want those assets on their books. S corp entity. I'm not sure where the "cash" came from, as there were no withdrawals over the years. I have to assume pocket cash. The only entry I can use to get these assets on the balance sheet with owner contribution as an opening equity J/E? It's a small mom & pop company; no F/S audit consequence other than potential tax side of things.
 
Ad

Advertisements

BIG E

VIP Member
Joined
Dec 19, 2020
Messages
101
Reaction score
14
Country
United States
Why not have the client recognize what was done and Dr. Inventory/CR SALES?
Of course, if it's merchandise, you'd have to recognize and pick up a sales tax liability?

Problem with booking a J/E to shareholder equity is to prove WHERE THE FUNDS CAME FROM.
 
Ad

Advertisements

Joined
Aug 10, 2020
Messages
68
Reaction score
5
Country
United States
Any expense recognized by the entity will reduce taxable gains. So, if the asset is going to be recognized as an expense then the entity will need to show exactly how the purchase was made. Since there are no f/s consequences, a restatement of prior period financials ie pro forma income statements is n/a. Also, perhaps filing amended prior year taxes is more than what the owner has in mind.

I would recommend drafting a depreciation schedule starting with the date of purchase. Then for tax purposes only reporting as an expense the depreciation amount for the tax year. That of course is only if enough documentation is available to convince a tax auditor that it was an expense incurred by the entity.

Also, this assumes that the asset is either generating a cash flow or is expected to in the future. If neither, then it is what gaap calls a nonmonetary asset with no commercial substance. In which case it has no value and therefore cannot be expensed.
 
Last edited:

Ask a Question

Want to reply to this thread or ask your own question?

You'll need to choose a username for the site, which only take a couple of moments. After that, you can post your question and our members will help you out.

Ask a Question

Similar Threads

ghost items 12
Ghost Securities 4
ghost transactions 18
Ghost bills 1
Ghost Bills 0
Ghost Investments 3
Ghost Bill Reminders 1
Ghost Matrix Items 2

Top