Consider this criteria

• whether the expense is a usual operating expense for that type of business e.g water bills for a farmer, purchase of meat by hotelier, payment of interest by a bank
• The generally accepted accounting treatment for that item subject to any extensions or prohibitions made by the income tax act

Further the remoteness and duality test is applied.

Remoteness test– applied in expenses that are clearly business or private.  Allow business, disallow private.

Duality test– applied in expenses that exhibit duality of purpose that is they are in some sense business and private. If an expense benefits the business first then has incidental benefit on the proprietor such an expense is allowable. However, if the expense has the first benefit on the proprietor and some incidental benefit on the business, such an expense is not allowable.