Question

General rule regarding determine capital and revenue expenses

Answer 1

Explanation:

A capital expenditure is assumed to be consumed over the useful life of the related fixed asset. A revenue expenditure is assumed to be consumed within a very short period of time. A more questionable difference is that capital expenditures tend to involve larger monetary amounts than revenue expenditures.

Answer 2

Answer:

Pure Reserves like General Reserve, P/L A/c (Cr. Bal.), Capital Reserve are directly transferred to Partner's Capital A/c in PSR

Specific reserves like WCF, IFF, Asset Replacement Reserves, JLP Reserve, etc. are transferred to Realisation A/c if there is any associated use of such reserves. For E.g. WCF should be transferred to Realisation if there is a Claim on WCF. However, if there is no such claim, the WCF should be directly transferred to Partner's Capital A/c in PSR.

Provision for Tax, Provision for Dep, Provision for doubtful debts, EPF, etc. should be transferred to Realisation A/c always.