If capital losses are negligible, they are_______ of the year in which they occur.

Debited to profit & loss account

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Shown in balance sheet on the assets side

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Shown in balance sheet on the liability side

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None of the above

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Solution

The correct option is D Debited to profit & loss account
Capital losses generally arise only when an asset is disposed of. However a negligible value claim will give rise to an allowable loss.
If capital losses are negligible they are debited to profit and loss account in the year in which they arise. These losses are not carried forward to be written off in coming years.

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