What Are the Criteria That Determine an Amount as Capital

question 106

Essay

What are the criteria that determine an amount as capital improvement rather than repair and maintenance expense? What is the proper tax treatment of a capital improvement for rental properties?

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Definitions:

Accounts Payable

A liability account on a company’s balance sheet representing money owed to creditors for goods and services purchased on credit.

Special Journals

Accounting journals designed for recording specific types of transactions in detail, such as sales, purchases, cash receipts, and disbursements, for efficient processing.

Cash Receipts Journal

A dedicated accounting ledger for documenting all cash inflows.

Purchases Journal

A record that specifically tracks all purchase transactions made by a business, often used in a manual accounting system.