Prepaid for Fixed assets

[Countingcat]

Scorp - 1120S

I paid for fixed assets in 2023 but the equipment will not arrive and be installed until 2024. How should I show the transaction on my 2023 return? I put it as prepaid expenses.

[Countingcat]

Forgot to mention, it is cash accounting.

[MinhT1]

Yes.

Fixed assets can only be depreciated when placed in service, i.e. in 2024.

[Countingcat]

OK. But what do I do with the expense on this year's return.  Is it considered a prepaid asset so that it shows up in the asset portion of the balance sheet in books and on the return? Or should it be somewhere else?

[MinhT1]

In 2023, in your accounting books and on your tax return, there's no expense for these fixed assets. This will show as Prepaid expenses on the asset side on the balance sheet.

[Countingcat]

Thanks. That's what I have been doing. Just needed confirmation because I was having trouble balancing books and tax. I can at least rule that out. 🙂