STARTUP COSTS or Organization Cost, in the U.S., is when a new corporation is created, the costs associated with the formation are not deductible. An election must be made to amortize organizational costs no later than the due date (including extensions) of the return for tax year in which the active trade or business begins. If an election is not made to amortize these costs, they must be capitalized on the books and are not subject to amortization resulting in permanent capitalization. Upon making the timely election, the corporation may recover these costs through amortization deductions over a 60 month period. Organizational expenditures include any expenditure which is:
The following are examples of organization costs:
CASH IN TRANSIT is cash being transferred from one business to another or between two parts of the same business. If it is not recorded as an asset in either an adjusting entry may be necessary.
PRO-FORMA INVOICE is a price quote. It is written as an invoice, and, in effect, says: This is the purchase price and terms we are offering.
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