ogoluwa

You need accounting 101, but here's a basic answer.

You pay taxes on money you take in, and get to deduct money you spend. If the money you spend benefits aspecific period that is =< than 1 year (such as a paycheck for a given week) you deduct that full expense in the year it was paid.

If what you spend the money on somethign that will last for several years (ie a machine that will last 5 years) you record that initisl outlay as an asset and use it up (depreciate it) over the 5 years in which it will provide service. This depreciation is recorded as a deduction in the income statement.

Hope this helps a bit, but you really need to crack an intro accounting text.