In Order to Deduct a Portion of the Cost of a Business

question 21

Multiple Choice

In order to deduct a portion of the cost of a business meal, which of the following conditions must be met?

• A)A client (not a supplier or vendor)must be present at the meal.
• B)The taxpayer or an employee must be present at the meal.
• C)The meal must occur on the taxpayer's business premises.
• D)None of these choices is a condition for the deduction.
• E)All of the choices are conditions for a deduction.

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Definitions:

Current Ratio

A liquidity ratio measuring a company's ability to pay short-term obligations, calculated as current assets divided by current liabilities.

Short-Term Notes Payable

Liabilities representing amounts borrowed that are expected to be repaid within one year or one operating cycle, whichever is longer.

Accruals

Accounting method where revenue and expenses are recorded when earned or incurred, regardless of when the cash transaction occurs.

Quick Ratio

A financial metric that measures a company's ability to cover its short-term liabilities with its most liquid assets, excluding inventory.