Question

Shinchan Ltd. spent the following amounts for his business during the year 2020-21
 Purchase of Furniture Rs.2,50,000
 Spent on whitewash of building Rs.1,00,000 (expected to last for 3 years)
 Services of Air conditioners Rs.20,000
 Rent of godown Rs.60,000
How will you classify the above expenditures?
(a) Capital Expenditure Rs.3,50,000; Revenue Expenditure Rs.80,000
(b) Capital Expenditure Rs.2,50,000; Revenue Expenditure Rs.1,80,000
(c) Capital Expenditure Rs.2,50,000; Revenue Expenditure Rs.80,000; Deferred Revenue Expenditure Rs.1,00,000
(d) Capital Expenditure Rs.3,50,000; Revenue Expenditure Rs.60,000; Deferred Revenue Expenditure Rs.1,20,000

Answer 1

(c) Capital expenditure Rs.2,50,000 ; Revenue expenditure Rs.80,000 ; Deferred revenue expenditure Rs.1,00,000.

Explanation:

Capital expenditure is that expenditure or amount that we spent on the purchase of fixed assets that we are going to use for a long time. so, purchase of furniture for Rs.2,50,000 will be capital expenditure, so total capital expenditure = Rs.2,50,000.

Revenue expenditure is the amount that we spent on day to day work or short time expenses. so, services of air-conditioner Rs.20,000 and rent of godown Rs.60,000 will be revenue expenditure , so total revenue expenditure = 20,000 + 60,000 = Rs.80,000.

Deferred revenue expenditure is the amount that we spent in present but we will get benefits from it in future. so, amount spent on whitewash of building Rs.1,00,000 will be deferred revenue expenditure. so total deferred revenue expenditure = Rs.1,00,000.