Assets vs Expenses

Vanessa:               Hi. I’m Vanessa Barrett with Polymath LLC and today we’re going to be talking about …

Penny:                    Ahh, ooh, ah. Hi. Sorry to interrupt.

Vanessa:               This is my friend, Penny. She has a pie business. How are you today?

Penny:                    Hi. Oh, I’m doing really well. How are you?

Vanessa:               I’m doing great.

Penny:                    Great. Ah. I have a very important question for you.

Vanessa:               Yeah, what’s your question?

Penny:                    I just recently bought an oven and some oven mitts and I’m wondering, do I put those in as assets or expenses?

Vanessa:               Well, how much did those oven mitts cost you?

Penny:                    The mitts were $10. The oven was 10,000.

Vanessa:               Well for the oven mitts since they were only $10 that’s not very much. You just need to enter those as an expense. The oven on the other hand that’s costing you $10,000, you’re going to want to have that on your books as an asset so that your accountant can depreciate it for you over time. If you have questions about depreciation, you should contact your tax accountant and they can help you with that.

Penny:                    Oooh, okay. I think that does it. I think it makes sense now. Thank you.

Vanessa:               I’m glad I could help and if you have any more questions, get in touch with us through

Penny:                    Bye.

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