Homework Answers
Capital Asset is an asset used for the purpose business with useful life more than one year and is not held for sale during the regular course of business. It is expected to generate cashflow over a period of time.
It has 3 main conditions to be classified as Capital Asset (all to be satisfied)
1. Used for business
2. Not held for sale during ordinary course of business
3. Generating revenue for more than a year
| Item | Capital Asset | Reason |
|---|---|---|
| a | No | House is used for residence and not for business (It is not shown in business books at all as it is his personal asset) |
| b | Yes | Truck is used in business and expected to generate revenue over some years |
| c | No | Stocks held are unrelated to his profession and are not part of his books (Those are his personal assets) |
| d | No | The Jewelry held as a part of stock in business and held for sale during ordinary course |
| e | No | It is outside is ordinary course of business |
| f | No | Automobile is used for personal purposes and not business purpose |
| g | No | Business suits are not expected to generate revenue over more than a year |
| h | No | It is not used for business |
| i | Yes | It is used for his profession and is expected to generate cashflow over a period of time |
Note : The entire answer is based on assuming the Capital Asset in accounting Terms and not Tax terms, which has an entirely different definition and concept
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