Characteristics and Income Taxation of Business Entities - Disposition

Disposition

Business itself:
If a business is disposed of prior to the end of the amortization period, the company/owner can deduct any remaining deferred start-up costs. However, they can deduct these deferred start-up costs only to the extent they qualify as a loss from a business.

Business Assets:
Depreciable assets can be: exchanged, retired, or sold.

After the disposition of an asset (depreciable), an accounting entry is made to recognize any unrecorded depreciation expenses up to the date of the disposition. The asset's cost and accumulated depreciation are then removed from the respective general ledger accounts. The losses or gains (realized) associated with the disposition are recorded in a separate account and appear on the income statement named as either income (gains) or expense (losses).

Sample Questions 1 - 6


Related Articles
  1. Professionals

    Introduction

    Introduction
  2. Professionals

    Sale of Incentive Stock Options

    CFP Online Study Guide - Employee Benefits Planning - Sale or Disposition of incentive stock options
  3. Professionals

    Disposition of Passive Activities

    Disposition of Passive Activities
  4. Professionals

    Business Financial Information

    Description of exam topics covering information regarding a business's finances.
  5. Professionals

    Capital Cost Allowance And Depreciation

    Depreciation can be used as a tax deduction.
  6. Entrepreneurship

    Writing Off the Expenses of Starting Your Own Business

    Learn how to navigate the complicated rules for writing off the expenses of starting your own business. It could save you a lot of money.
  7. Options & Futures

    Financial Statements: Long-Lived Assets

    By David Harper (Contact David)In the preceding section, we examined working capital, which refers to the current assets and liabilities of a company. In this section, we take a closer look at ...
  8. Professionals

    Introduction

    CFP Online Study Guide - Employee Benefits Planning - Employee Stock Options
  9. Professionals

    Income Statement: Non-recurring Items

    CFA Level 1 - Income Statement: Non-recurring Items. This section focuses on nonrecurring income statement items. Provides examples on various infrequent and extraordinairy entries.
  10. Professionals

    Depreciation Accounting

    CFA Level 1 - Depreciation Accounting. This sections covers depreciation accounting. Includes formulas and sample calculations for a few common methods of finding depreciation.
RELATED TERMS
  1. Disposition

    Getting rid of an asset or security through a direct sale or ...
  2. Employee Stock Purchase Plan - ...

    A company-run program in which participating employees can purchase ...
  3. Gain

    An increase in the value of an asset or property. A gain arises ...
  4. Depreciation

    1. A method of allocating the cost of a tangible asset over its ...
  5. Accumulated Depreciation

    The cumulative depreciation of an asset up to a single point ...
  6. Retirement Method of Depreciation ...

    An accounting procedure in which an asset is expensed for depreciation ...
RELATED FAQS
  1. What is the relationship between accumulated depreciation and depreciation expense?

    Understand the relationship between accumulated depreciation and depreciation expense. Learn how each one is accounted for ... Read Answer >>
  2. How does accumulated depreciation affect net income?

    Learn why accumulated depreciation does not directly affect a company's net income; understand where a company accounts for ... Read Answer >>
  3. What happens to accumulated depreciation when you sell an asset?

    Learn what happens to a company's accumulated depreciation when it sells an asset. Understand why accumulated depreciation ... Read Answer >>
  4. What would cause a decrease in accumulated depreciation?

    Understand what causes a decrease in a company's accumulated depreciation. Learn why a company's accumulated depreciation ... Read Answer >>
  5. What is the tax impact of calculating depreciation?

    Understand the tax implications of a company's depreciation. Learn how differences in accounting methods change the amount ... Read Answer >>
  6. Why does accumulated depreciation have a credit balance on the balance sheet?

    Wonder why accumulated depreciation is a credit account, despite residing on the asset side of the balance sheet? Why not ... Read Answer >>
Hot Definitions
  1. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  2. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  3. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  4. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  5. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  6. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
Trading Center