Accounting & Bookkeeping & Small Business Forum

[Shay Simmons]

I do bookkeeping part time for a couple of small businesses in our small village. I am not a trained bookkeeper or accountant, I basically balance the books every month, produce an income report, and put everything into an Excel spreadsheet for the "real" accountants who do the taxes.

One of my clients owns the building in which her beauty salon is located. We have unbelievably foul water here, and she buys bottled water from Puritan so that her employees and clients can get a drink without having to use what comes out of the faucet.

Should I list this as a building expense or an operating expense? And for tax purposes does it matter? In addition to her salon, she has a business tenant but does not pay for their drinking water.

Thanks in advance.

[RobJ]

Shay Simmons wrote: Should I list this as a building expense or an operating expense? And for tax purposes does it matter?
It depends on the amount of the expense. It's probably splitting hairs, but I wouldn't list it as an operating expense. I'd list it under General & Administrative (overhead).

As for taxes, no it doesn't matter.

[Ken]

This would usually be considered an operating expense.

[stasia2003]

Ken wrote: This would usually be considered an operating expense.

I agree. Especially if the clients and visitors to your office are using the water. I would definitely consider it an operating expense.

[RobJ]

stasia2003 wrote: I agree. Especially if the clients and visitors to your office are using the water. I would definitely consider it an operating expense.
You're absolutely right. I don't know what I was thinking.

[Ingmar]

RobJ wrote: Shay Simmons wrote: Should I list this as a building expense or an operating expense? And for tax purposes does it matter?
It depends on the amount of the expense. It's probably splitting hairs, but I wouldn't list it as an operating expense. I'd list it under General & Administrative (overhead).

As for taxes, no it doesn't matter.


My question is probably totally off subject, but here it is:
Where I am from these costs (drinks, foods, etc.) are qualified as costs that have a mixed caracter, meaning it is very hard to defend that these costs are 100% strictly business expenses. Basically it indicates that costs of food and drinks are mixed, because the owner themselves use them too and would have had to pay them out of their own private wallet if they were employed under a boss. Also, business-dinners dont always tend to turn out to be "business" dinners, which is another reason why these costs in my homecountry are being qualified as "mixed" I know it is far fetched, and I myself find this rule a little ridiculous, but I am not greater then the law from my homecountry (The Netherlands). These mixed costs can be booked as expenses for 100% at first, but when doing the annual Tax Return these costs will be added to the income for 10% or 25% (based on the type of corporation) of their original value.
Do they heve a similar construction here in the U.S., or are these costs 100% deductable ?

[MikeBarnes28]

I'm pretty sure it's an operating expense

[igorproper]

Definitely an operating expense. Building expense is maintenance and repairs, and water does not fall within this category.

[Tyson]

Yes, definitely an operating expense. If you have an accounting code for office expense, that's where it should go.

[Ahshucks]

I usually identify utility expense, and may further subclassify them as electric, heat, refuse, water, sewer. This clearly identifies this expense as an occupancy expense, a classification that is sorely needed to allocate this cost to all the occupied areas.