Company Start Up Bookkeeping Question

by Maria
(San Diego)

Company Start Up

Company Start Up

1. Does this also apply for a single member LLC?


2. Let’s say the official start day of my business is March 2009 but I bought expense (start up cost) in December 2008 a prior year can you still deduct it since it was in 2008 and not in 2009?

3. Last question I know the 5,000.00 rule but how would a bookkeeper journal entry that so that the cpa or tax person can take that sec 125 deduction?

Like normally I would debit the expense and credit cash but that’s when the business has started what happens if I have 300.00 in office supplies for start up costs? How would I journal entry that then.

I would really appreciate your help I am a bookkeeper trying to get more knowledge and I would like to understand this better. Thank you.

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Jun 08, 2018
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starstarstarstarstar 		Company Starting Up
by: Stephanie

Thank you for your company start up bookkeeping questions.

1) Yes

2) Yes - keepin it simple! :)

3) You can simply credit cash and debit Start-Up Costs as an Expense account, and your CPA can expense it.

Or, you can credit cash and debit Start-up Costs as an Asset account, and your CPA can take a section 179 deduction.

You can only take up to $5,000 as an expense for startup costs, anything over that would need to be amortized as an asset.

Typically assets under $500 are expensed, no need to depreciate.

I hope that helps. Let me/us know if you have any more questions.
Apr 09, 2015
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starstarstarstarstar 		Good Company Start Up Reading
by: Michael C. Quinn

This is great! I was looking for exactly the same thing about Company Start Ups all day yesterday.
Jun 05, 2009
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starstarstarstarstar 		Thank You For Your Help With My Bookkeeping Questions
by: Maria

Hello, Thank you for help with my questions. I know you are probably way busy but if you can help me answers these questions I would be so grateful. I am directing friends to your website. Thank you again..

This is for a Sole Proprietorship.

1. I understand that it is my choice to use the expense method or asset method for my start up costs. But can I used both at the same time( meaning expense the start up expense such as business cards adverting etc.. and capitalize the assets such as computers and furniture.)

2. Can I pay myself back and Expense or capitalize together for start up costs? What I mean by that is if I buy a computer for 2,000.00 before the business starts do I

a. Debit the asset- computes and credit loan payable-to myself( liability account) or

b. Debit the asset account and credit owners equity?

Either way there is going to be a positive 2,000.00 in the asset account, so my question is can I debit either loan payable or owners equity for the 2,000.00 and credit the cash when my business has the money to pay me back?

3. And when I do that am I still allowed to depreciate the asset or is that double dipping?

Is the process the same for an expense, can I get paid back and deduct the expense on my schedule C?

4. If I decided to make my start up costs an asset account should I make an asset account called startup costs or should I make individual asset accounts for example computers, furniture etc..

Since you can use 5,000 of start up costs if you take that election does that mean your asset accounts for the 2,000.00 computer will go to 0 at the end of the year? Since you took the full deprecation?

What would you personally do if you had only 3,000.00 in start up costs, two computers the rest office supplies adverting etc.. would you expense them all or capitalizing them?

If you expense them would you put them in individual expense accounts like advertising, office supplies, or one expense account called start up expense?

Last question?.. would the 5,000.00 in startup costs be treated separate from the regular business expense incurred after the business open. ( for tax purposes)

Thank you.

Maria

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New business - E&O needed?

I'm setting up my bookkeeping business in Ontario, should I get Errors and Omissions Insurance coverage?

Hello,

Thank you for your question.

Yes! Errors and Ommission insurance is always recommended. Better safe than sorry and nobody's perfect. :)

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Start Up Costs

by Pat

In a new business when purchases are made for items to use as display (racks, shelves,etc) should this expense get recorded in balance sheet as start up cost or on P and L side as expense?

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Starter

If I want to get into book keeping and I do not realy know much about the subject where is the best place for me to start?

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Starting a Set of Books

by Glenda
(Canada)

Hi, I am wondering what information you need to start a set of books for an existing company that has recently incorporated from a sole proprietorship.

Is the balance in the bank account recorded as retained earnings?

Hi Glenda,

Thank you for your question.

In order to start a set of books for an existing company that has recently incorporated from a sole proprietorship, you would need the balance sheet from the last date of business for the sole proprietorship.

Then you would do one big journal entry to record the ending balances of the sole proprietorship as the beginning balances of the corporation. All the balances are typically journal entried through the Opening Balance Equity account.

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