An Expense Is Considered Necessary If It Is "Appropriate and Helpful

question 102

True/False

An expense is considered necessary if it is "appropriate and helpful" in the taxpayer's business.

Understand the difference between capital expenditures (betterments) and revenue expenditures (repairs).

Compute book value and recognize gain or loss on the sale of assets.

Comprehend the concept of extraordinary repairs and their impact on PPE.

Know how to account for revenue and capital expenditures in maintaining and improving assets.

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Definitions:

Cash Budget

A financial plan that estimates cash inflows and outflows over a specific period, helping businesses manage their cash flow and ensure liquidity.

Depreciation

The accounting method of allocating the cost of a tangible or physical asset over its useful life.

Doubtful Debts

Monetary amounts owed to a company that are considered unlikely to be paid, often set aside as an allowance for doubtful accounts.

Inventory Balance

Indicates the amount or value of inventory on hand at any given point in time, factoring in additions, subtractions, and adjustments.