Question

Distinguish between capital and revenue expenditure and state whether the
following statements are items of capital or revenue expenditure :
(a) Expenditure incurred on repairs and whitewashing at the time of
purchase of an old building in order to make it usable.
(b) Expenditure incurred to provide one more exit in a cinema hall in
compliance with a government order.
(a) Registration fees paid at the time of purchase of a building
(b) Expenditure incurred in the maintenance of a tea garden which will
produce tea after four years.
(c) Depreciation charged on a plant.
(d) The expenditure incurred in erecting a platform on which a machine will
be fixed.
(e) Advertising expenditure, the benefits of which will last for four years.

Answer 1

Answer:

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Answer 2

The answer is stated below:

Explanation:

• Capital expenditure is the term which is defined as the benefit or the advantage of the expenditure which is to be received over the accounting periods or the years. Account which is incurred on the purchase of the fixed assets like  patents,  land and building, trademark and plant and machinery, are capital expenditure. In short, these are those kind of expenditure whose benefits are received over the number of periods.

• Revenue expenditure are those expenditures or expense, whose benefit are confined to a short period of time, usually for a year. Its example are audit fees, rent, wages and insurance premium.

Classifying the items:

a. Capital expenditure

b. Capital expenditure

a. Capital expenditure

b. Revenue expenditure

c. Revenue expenditure

d. Capital expenditure

e. Revenue expenditure

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