How to handle appreciation of assets?
Englicist
Member Posts: 3
Though in most cases assets are depreciated, in some cases like content website, trademarks, shares, land, gold etc. the value of the asset is likely togo up over time. How to handle this thing in Wave accounting?
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Hey Englicist,
In principle, appreciatingan asset should work similarly to depreciation. To perform it, you'd add two accounts: One long term asset account called "Accumulated Appreciation" and an income account called "Appreciation Income."
Periodically, you would create journals that debit Accumulated Appreciation and credit Appreciation Income to increase their value.
However, if you're basing your tax filings off of your accounting, there might tax implications to increasing the value of your assets. I'd be sure to talk to an accountant just to be sure that appreciating your assets is the right thing to do in this instance.
But until I sell the asset, there is no normal gain, so why shouldI show it as an income and pay tax for that?
Asset appreciations are usually shown as unrealized gains in the Balance Sheet. In most countries there is no Tax until the gains are realized by way of a disposal.