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Question
An expenditure is a capital expenditure because ______.
Options
The amount involved is large.
The amount is paid in lump sum.
It is intended to benefit the future period.
Solution
An expenditure is a capital expenditure because it is intended to benefit the future period.
Explanation:
Capital expenditure means the expenditure the benefit of which is not exhausted within the current year but is enjoyed over a long time period.
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RELATED QUESTIONS
Expenditure incurred ₹ 20,000 for trial run of a newly installed machinery will be ______.
Legal expenses incurred to purchase land are ______.
Capital expenditure is incurred for ______.
Expenses incurred to repair a second-hand machine, purchase by the firm, to make it usable are treated under which expenditure?
Match the Column I and Column II:
| Column - I | Column - II | ||
| (a) | Capital Expenditure | i | Repairs costing ₹ 600 carried out on a boiler. |
| (b) | Revenue Expenditure | ii | Advertising expenses ₹ 25,000 incurred for launching a new product in the market. |
| (c) | Deferred Revenue Expenditure | iii | Interest received. |
| (d) | Revenue Receipts | iv | A sum of ₹ 15,000 spent on the overhauling of a second-hand delivery van. |
Why is it necessary to differentiate between capital and revenue items in accounting?
State with reason whether the following is Capital or Revenue Expenditure:
Cartage paid to bring a new machine to the factory.
State whether the following is Capital, Revenue or Deferred Revenue Expenditure.
Cartage paid on purchase of furniture.
Cost of raising a loan.
In the following case indicate the amount to be debited as Capital Expenditure and Revenue Expenditure:
Furniture of the book value of ₹ 15,000 was sold off at ₹ 10,000. New furniture was purchased for ₹ 20,000 and ₹ 100 was paid as cartage on it.
