Question

Purchase of machinery is a. * A. revenue receipt. B. capital receipt. C. capital expenditure. D. revenue expenditure. ​

Answer 1

Answer:

A Capital expenditure refers to the expenditure which involves the creation of an asset. While incurring a capital expenditure, either a liability is created or Cash or Bank balance decreases and a fixed asset is created. A fixed assets is an asset the benefit of which is derived by a Company over a period of more than one year or over a long period of time. Machinery is a fixed asset the benefit of which is derived over a long period of time. Thus, the purchase of machinery is a capital expenditure.