How do I claim cash purchases on my business taxes?
I just started my welding business in January 2007 and paid cash for all of my equipment. I'm not sure how to claim this. I haven't taken in any revenue on this business yet, and am still in the set up process.
Purchasing large dollar equipment (over $500) will be categorized as the purchase of an asset. If the cash came from personal funds, then the offsetting entry to assets will be either a loan to the company from you or as an equity investment. The best thing to do is visit with your business tax accountant to discuss the pros/cons of both options as it relates to your specific situation.
Often entrepreneurs don't have the core competencies to understand accounting, which could result in a startup failing. Here is how an entrepreneur should approach hiring an accountant or outsourcing her financial tasks to ensure success.