without taxes why spread it [depreciation] out....just expense it all at once...
Because it wouldn't give a true picture of the business.
For example, suppose someone bought a house for $100,000 on December 31, 1999, and expected to rent it out indefinitely. On December 30, 1999, his balance sheet says Assets, Cash: $100,000. On December 31, 1999, his balance sheet says Assets, Property: $100,000. Money has changed hands, but has not been made or lost. It would not give a true picture of the business to say Income (Loss): ($100,000) for 1999, regardless of taxes.
The concept of depreciation predates the U. S. government, not to mention the U. S. corporate income tax system. |
