The feeling of 100,000 baht poorer does make you feel like you just made a loss. But what you bought are assets and is different from if you had spent this month at a restaurant.
Think of assets as a "prepaid ticket" on the BTS. Yes, your money is used to buy the prepaid ticket right away, but you will be able to enjoy "free" rides on the BTS for the next 2 months.
Neither the "Money Gone Now" feeling nor the "Free Rides" feelings are correct as the money paid os amortised over the 2 months and should be recognised as such in your accounting for your wallet spending (similarly, this should be the concept in your business).
The concept of "amortization" is equally perplexing for non-accountants. It is like a monthly dose of spending for a medicine you bought from the pharmacy. You buy it once, but the usage is by month. So the reduction of what is left is a periodically even amount. This is amortization. |
|
If you base your accounting on a cash basis, then you would report a loss, but that is not normally the way financial results are looked at these days (which is not to say that cash is not a vital component of a successful business)
Accounting on an accruals basis means that, for fixed assets like computers, only the depreciation for the month is counted as a cost. Usually, the life of a computer is estimated at 3 years, so the monthly depreciation is 1/36 of the cost of the computer.
|
