COMMERCE 4SB3 Lecture Notes - Lecture 4: Contingent Liability, Tax Deduction, Current Asset

• School: McMaster University
• Department: Commerce
• Course: COMMERCE 4SB3
• Professor: Eric Bentzen

Document Summary

Sta(cid:396)ti(cid:374)g poi(cid:374)t is p(cid:396)epa(cid:396)i(cid:374)g gaap fi(cid:374)a(cid:374)(cid:272)ial state(cid:373)e(cid:374)ts. The(cid:396)e"s a diffe(cid:396)e(cid:374)(cid:272)e (cid:271)et(cid:449)ee(cid:374) this and tax standpoint. One concept to analyze this is if it"s t(cid:396)ee (cid:894)capital transaction) or fruit (income transaction that brings in revenue). Only half of capital gain gets included in income and revenue gets included at 100% **pg. (cid:1005)(cid:1010)(cid:1009) (cid:272)a(cid:374) see (cid:272)ha(cid:396)t to help a(cid:374)al(cid:455)ze if it"s (cid:272)apital t(cid:396)a(cid:374)sa(cid:272)tio(cid:374) o(cid:396) (cid:271)usi(cid:374)ess i(cid:374)(cid:272)o(cid:373)e. Usually selling house is (cid:272)apital t(cid:396)a(cid:374)sa(cid:272)tio(cid:374) (cid:271)ut if (cid:455)ou"(cid:396)e a la(cid:374)d de(cid:448)elope(cid:396) that"d (cid:271)e (cid:271)usi(cid:374)ess i(cid:374)(cid:272)o(cid:373)e (cid:271)e(cid:272)ause that"s thei(cid:396) (cid:373)ai(cid:374) sou(cid:396)(cid:272)e of i(cid:374)(cid:272)o(cid:373)e. When you sell inventory (under current asset) it goes through cogs which is business income, but when you sell long-term assets it can be categorized as capital transaction. If you buy a case of wine and sell it in the future it can be capital gain. (cid:374)u(cid:373)(cid:271)e(cid:396) a(cid:374)d f(cid:396)e(cid:395)ue(cid:374)(cid:272)(cid:455) of t(cid:396)a(cid:374)sa(cid:272)tio(cid:374); if (cid:455)ou do so(cid:373)ethi(cid:374)g ofte(cid:374) it"s usuall(cid:455) (cid:271)usi(cid:374)ess i(cid:374)(cid:272)o(cid:373)e. (cid:272)o(cid:396)po(cid:396)ate o(cid:271)je(cid:272)ti(cid:448)es; (cid:271)e (cid:448)e(cid:396)(cid:455) spe(cid:272)ifi(cid:272) a(cid:271)out the (cid:374)atu(cid:396)e of p(cid:396)odu(cid:272)ts/se(cid:396)(cid:448)i(cid:272)es (cid:455)ou"(cid:396)e selling (p. 160-165)