Explain when an expenditure should be capitalized based upon accounting principles. From time to time, it...

Explain when an expenditure should be capitalized based upon accounting principles. From time to time, it is suggested that all business expenditures should be deducted when incurred for tax purposes. Do you agree with this proposition, and if so, why?
In addition, can an individual take a medical deduction for a capital improvement to his or her personal residence? If so,how is it calculated?

Solutions

Expert Solution

As per the principles of accounting, an expenditure should be capitalized when there is a certainty of benefits from the expenditure incurred in two different accounting periods. The cost element of expenditure is than bifurcated between the accounting periods through Depreciation or any Amortization. Now comes the rules of Taxation which is different from the perspective of principles of accounting. Here comes the matching principle for any expenditure incurred, should be recognized in that year where revenues are generated from that expenditure.

The proposition that to expense all the expenditures related to business is usually defended on the grounds of simplification, encouraging capital investment, and lack of bias (at least over the long run) and criticized on the grounds of potential economic bias (at least within the short run) and revenue loss by the govt.

Yes, an individual can take a medical deduction for a capital improvement to his or her personal residence provided it must be intended to be used for medical purposes.

To calculate, deduct the amount of cost in excess of increase in Fair Market value, only if it is greater than Fair Market Value.

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

Contrast rules-based versus principles-based accounting,

Certain principles should be followed in the development of an accounting information system. Identify and explain...

Certain principles should be followed in the development of an accounting information system. Identify and explain each of the principles.

Question1 -explain the concept and principles that underlie accounting? -explain how accounting concepts, principles, and recognition...

Question1 -explain the concept and principles that underlie accounting? -explain how accounting concepts, principles, and recognition criteria interrelated and provide guidance when recording cerian transections. provide at least one example to illustrate your answer? -Explain the objective of general-purpose financial reporting as defined in the Conceptual Framework. Why is it necessary to have an objective? -Provide a brief summary of each of the qualitative characteristics and the constraint on providing financial information as outlined in the Conceptual Framework ? -Two...

What are intergovernmental transfers and why are they important for local governments based upon the principles...

What are intergovernmental transfers and why are they important for local governments based upon the principles of democratic theory?

list and explain the principles of behavior-based safety and why an employer should use this concept...

list and explain the principles of behavior-based safety and why an employer should use this concept in the workplace

Read “It's Time for Principles-Based Accounting Ethics” which can be accessed through the DeVry online library....

Read “It's Time for Principles-Based Accounting Ethics” which can be accessed through the DeVry online library. In 3-4 pages (12-pt type, double-spaced) answer the following questions: Do you agree with the authors that a code of ethics should do more than establish minimum acceptable standards? Why or why not? Describe the five cardinal virtues of professional accountants that the article’s authors discuss. We’ve talked about rules-based versus principles-based accounting standards. Should we have rules-based ethics standards? Why or why not?...

Which of the following costs of goodwill should be capitalized? Costs of goodwill from a business...

Which of the following costs of goodwill should be capitalized? Costs of goodwill from a business combination accounted for as a purchase Costs of developing goodwill internally a) No No b) No Yes c) Yes No d) Yes Yes

1. Explain how research expenditure and development expenditure should be dealt with in preparing a company...

1. Explain how research expenditure and development expenditure should be dealt with in preparing a company financial accounts.

When financial statements are affected by a material departure from generally accepted accounting principles, the auditors...

When financial statements are affected by a material departure from generally accepted accounting principles, the auditors should: A. Issue an "except for" qualification or a disclaimer of opinion. B. Withdraw from the engagement. C. Issue an unmodified opinion with a basis for modification paragraph. D. Issue an "except for" qualification or an adverse opinion.

1) Identify three situations in which accounting measures are based upon present values....please explain 2) Mary...

1) Identify three situations in which accounting measures are based upon present values....please explain 2) Mary will be making an investment of $5000 per year for 5 years The investment will be made at the beginning of each year. The interest is 9% compounded quarterly How much will she have at the end of the 5 years? 3) What's the difference between the effective yield and the stated rate of interest. Which one of these would be higher....please explain. 4)...

Subjects