Question

Spent on making an entrance for a Factory Building ₹ 1,50,000 should be considered as ______.



1) Revenue expenditure

2) Capital expenditure

3) Deferred revenue expenditure

4) Revenue Receipt

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Answer 1

Answer:

Option 2) is correct

Amount spent on construction of fixed asset is a part of Capital expenditure.

Thus, amount spent on the construction on the entrance gate of factory(a fixed asset) is a Capital expenditure.

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Answer 2

Spent on making an entrance for a Factory Building ₹ 1,50,000 should be considered as Capital expenditure. (Option 3)

• Capital expenditure results in the acquisition of an asset or boosts the earning capability of the firm.
• Long-term advantages accrue to the organization as a result of such spending.
• For example, the acquisition of a building, plants and machinery, furnishings, copyrights, and so forth.
• Capital expenditures are frequently used to improve operational efficiency, generate long-term revenue, or make changes to a company's current assets.
• Capital expenditure differs from other forms of spending that are focused on short-term operational expenses, such as overhead expenses or payments to suppliers and creditors.