Question

Assertion (A) :- Capital Expenditure are recurring in nature
Reason (R) :- Capital Expenditure are incurred to increase the earning capacity.
(a) Both A and R are correct and R is the correct explanation of A,
(b) Both A and R are correct but R is not the correct explanation of A.
(c) A is correct but R is incorrect.
(d) A is incorrect but R is correct.

Answer 1

Answer:

Option (d) A is incorrect but R is correct.

Answer 2

(d) A is incorrect but R is correct

Explanation:

• Capital expenditure refers to the expenditure that has been incurred on the physical assets of the organization.
• These expenditures are generally non-recurring in nature.
• Revenue expenditure refers to that expenditure where it involves day-to-day salaries of laborers, rent, etc.
• Hence, these expenditures are recurring in nature.
• Capital expenditure is also undertaken in order to increase the earning capacity of the organization.