Question

repair charge of office old furniture is revenue expense .​

Answer 1

Answer:

(i) Any amount spent on the acquisition of asset, be it a new asset or a second hand asset, is an expense of capital nature. Here, a second hand machine was purchased and repairs charges were incurred along with the carriage and freight expenses (incurred on acquisition). All such expenses are of capital nature. Thus, it is a capital expenditure because it is incurred to put the machine in working conditions.

(ii) When a new building is purchased or constructed, then all the expenses incurred till the date at which building is put to use are to be capitalised. So, painting expenses incurred on a newly constructed (or purchased) factory is a capital expenditure.

(iii) Carriage paid on the purchase of goods is a revenue expenditure because it is an ordinary business expense of routine nature.

(iv) Legal expenses incurred on the purchase of land is a capital expenditure. This is because all the expenses incurred up to the date at which land is put to use are to be capitalised. So, the legal expenses are of capital nature.

(v) Custom duty paid on the import of machinery (acquisition of asset) for the modernisation of factory production is a capital expenditure. Moreover, as this expense will increase the production capacity in future, therefore it an expense of capital nature.

(vi) Custom duty paid on the purchase of raw materials (goods) is a revenue expenditure because it is an ordinary expense of recurring nature.

(vii) Repair charges necessitated by negligence (on existing assets) is a recurring nature expense. Such repairs arise due to normal wear and tear of assets. Therefore, repair expenses incurred are categorised under revenue expenditure

Explanation:

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