Q&A Part 2/4 Keeping Records for Non Corporate Business Assets

Q: How does Accumulated Amortization differ from Amortization?
A: Accumulated Amortization is an offset to the Cost of an asset. This is where you record the other side of the expense (debit) as a credit to reduce the cost. We call the net result, Cost less Accumulated Amortization "Net Book Value"

Q: How do you use the disposal row on the UCC schedule?
A: We answered this with an example in the webinar. We record the Proceeds on disposition, but only up to Cost.  In other words, if Proceeds are higher than Cost (adjusted cost of course), we only record Cost. If there are other assets in the pool, and this reduction in the pool generates a negative number, we record a Recapture. If there are no assets left in the pool, we would record the remainder of that Class of assets as a Terminal Loss. That's a very simplistic representation of the rules. Really, this topic is huge, it covers several chapters in the CCH Preparing your Income Taxes book, and there are close to 100 IT bulletins and guides dealing with CCA claims and the calculation of UCC for tax purposes.

Q: I still don't get it. The proceeds are written off against the whole pool.
A: Yes, the proceeds, but only up to the amount added to the pool originally, reduce the pool.

I'll be answering more of the great questions from this week's workshop later today. Check back with me.