Unadjusted Basis
Unadjusted basis refers to the original cost to purchase an asset. This amount includes not only the initial price the purchaser paid to acquire the asset but also includes other costs such as expenses and liabilities assumed to purchase it. Adjusted basis is a related term, and refers to any adjustments made to the original purchase price of an asset over time. Unadjusted basis is used mostly in accounting nomenclature and is akin to the concept of cost basis.
Definition: Unadjusted basis refers to the original cost of purchasing an asset. This amount includes not only the initial price paid by the buyer to acquire the asset but also other expenses and liabilities incurred at the time of purchase. The unadjusted basis is mainly used in accounting terminology and is similar to the concept of cost basis.
Origin: The concept of unadjusted basis originated in accounting to accurately record and reflect the actual expenditure of a business when purchasing an asset. As accounting standards evolved, this concept became widely used in financial reporting and tax filings.
Categories and Characteristics: The unadjusted basis can be divided into the following categories:
- Initial Purchase Price: This is the direct cost paid when purchasing the asset.
- Additional Expenses: Includes transportation fees, installation fees, taxes, and other additional expenditures related to the purchase of the asset.
- Assumed Liabilities: Such as debts or obligations attached to the asset at the time of purchase.
Specific Cases:
- Company A purchased a machine, paying 100,000 yuan for the purchase price, and additionally paid 10,000 yuan for transportation and 5,000 yuan for installation. The unadjusted basis is 115,000 yuan.
- Individual B purchased a property, paying 500,000 yuan for the purchase price, and also incurred 20,000 yuan in taxes and 15,000 yuan in renovation costs. The unadjusted basis is 535,000 yuan.
Common Questions:
- Q: What is the difference between unadjusted basis and adjusted basis?
A: The unadjusted basis is the original cost of the asset, while the adjusted basis is the amount after adjustments to the original cost, considering factors like depreciation and appreciation. - Q: Why is the unadjusted basis important?
A: The unadjusted basis is crucial for calculating depreciation and gains or losses on assets, helping to accurately reflect the financial status of a business.
