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All questions of Unit 4: Capital And Revenue Expenditures and Receipts for CA Foundation Exam
Entrance fee of Rs.2,000 received by Ram and Shyam Social club is- a)Capital receipt
- b)Revenue receipt
- c)Capital expenditures
- d)Revenue expenditures
Correct answer is option 'A'. Can you explain this answer?
Entrance fee of Rs.2,000 received by Ram and Shyam Social club is
a)
Capital receipt
b)
Revenue receipt
c)
Capital expenditures
d)
Revenue expenditures
|
Priya Patel answered |
Capital receipts are a non-recurring incoming cash flow into your business, which leads to the creation of a liability (a debt to be paid in the future) and a decrease in company assets (resources that lead to capital gain).
Brokerage on the issue of shares and debentures is a _______expenditure : - a)Revenue
- b)Capital
- c)Deferred Revenue
- d)Partly capital partly revenue
Correct answer is option 'C'. Can you explain this answer?
Brokerage on the issue of shares and debentures is a _______expenditure :
a)
Revenue
b)
Capital
c)
Deferred Revenue
d)
Partly capital partly revenue
|
Rajat Patel answered |
Brokerage on the issue of shares and debentures is a Deferred Revenue Expenditure. This expenditure is incurred in one period but its benefit extends to a period of 3 to 5 years. Hence this amount is deferred and written off.
Loss caused by theft of cash by cashier after business hours is a : - a)Revenue loss
- b)Deferred revenue loss
- c)Capital loss
- d)None of the above
Correct answer is option 'C'. Can you explain this answer?
Loss caused by theft of cash by cashier after business hours is a :
a)
Revenue loss
b)
Deferred revenue loss
c)
Capital loss
d)
None of the above
|
Kavita Joshi answered |
Loss of cash due to theft committed either by the employees or by the outsiders, after business hours, is a capital loss because the loss is outside the trade and not incidental to the business. If the loss had been caused during the business hours it would have been a revenue loss because it is incidental to the business.
Amount spent on unsuccessful patent right is a : - a)Revenue Expenditure (Even though the amount is large)
- b)Deferred Revenue Expenditure (If the amount is large)
- c)Capital Expenditure
- d)None of theses
Correct answer is option 'A'. Can you explain this answer?
Amount spent on unsuccessful patent right is a :
a)
Revenue Expenditure (Even though the amount is large)
b)
Deferred Revenue Expenditure (If the amount is large)
c)
Capital Expenditure
d)
None of theses
|
|
Rajat Patel answered |
Amount spent on unsuccessful patent right is a revenue expenditure as the entire amount spent is a loss with no signs of any recovery in future through any income. Hence, entire amount should be written off all at one go.
Amount of Rs.5,000 spent as lawyers fee to defend a suit claiming that the firm factory site belonged to the plaintiff land is - a)Capital expenditure
- b)Revenue expenditure
- c)Deferred revenue expenditure
- d)None of the above
Correct answer is option 'B'. Can you explain this answer?
Amount of Rs.5,000 spent as lawyers fee to defend a suit claiming that the firm factory site belonged to the plaintiff land is
a)
Capital expenditure
b)
Revenue expenditure
c)
Deferred revenue expenditure
d)
None of the above
|
|
Priya Patel answered |
A revenue expenditure is an amount that is expensed immediately—thereby being matched with revenues of the current accounting period. Routine repairs are revenue expenditures because they are charged directly to an account such as Repairs and Maintenance Expense.
Recovery of Bad debt is a : - a)Revenue Receipt
- b)Capital Receipt
- c)Capital Expenditure
- d)Revenue Expenditure
Correct answer is option 'A'. Can you explain this answer?
Recovery of Bad debt is a :
a)
Revenue Receipt
b)
Capital Receipt
c)
Capital Expenditure
d)
Revenue Expenditure
|
Deepika Desai answered |
Recovery of bad debt is a revenue receipt. Let's break down the answer into headings and HTML bullet points:
Revenue receipt:
- Revenue receipts are the income earned by a business by selling goods or services or any other operational activity.
- Recovery of bad debt is a revenue receipt as it is the income earned by the business through the recovery of the amount that was previously written off as bad debt.
Capital receipt:
- Capital receipts are the income earned by a business through non-operational activities such as the sale of long-term assets, raising of capital, etc.
- Recovery of bad debt cannot be considered as a capital receipt as it is earned through an operational activity.
Capital expenditure:
- Capital expenditure refers to the expenses incurred by a business for acquiring long-term assets such as buildings, land, machinery, etc.
- Recovery of bad debt cannot be considered as capital expenditure as it does not involve the acquisition of any long-term assets.
Revenue expenditure:
- Revenue expenditure refers to the expenses incurred by a business for the day-to-day operations such as salaries, rent, utilities, etc.
- Recovery of bad debt cannot be considered as revenue expenditure as it does not involve any expenses incurred by the business.
In conclusion, recovery of bad debt is a revenue receipt as it is the income earned by a business through an operational activity.
Revenue receipt:
- Revenue receipts are the income earned by a business by selling goods or services or any other operational activity.
- Recovery of bad debt is a revenue receipt as it is the income earned by the business through the recovery of the amount that was previously written off as bad debt.
Capital receipt:
- Capital receipts are the income earned by a business through non-operational activities such as the sale of long-term assets, raising of capital, etc.
- Recovery of bad debt cannot be considered as a capital receipt as it is earned through an operational activity.
Capital expenditure:
- Capital expenditure refers to the expenses incurred by a business for acquiring long-term assets such as buildings, land, machinery, etc.
- Recovery of bad debt cannot be considered as capital expenditure as it does not involve the acquisition of any long-term assets.
Revenue expenditure:
- Revenue expenditure refers to the expenses incurred by a business for the day-to-day operations such as salaries, rent, utilities, etc.
- Recovery of bad debt cannot be considered as revenue expenditure as it does not involve any expenses incurred by the business.
In conclusion, recovery of bad debt is a revenue receipt as it is the income earned by a business through an operational activity.
Heavy advertisement expenditure should be treated as :- a)Deferred Revenue Expenditure
- b)Revenue expenditure
- c)Capital Expenditure
- d)None of these.
Correct answer is option 'A'. Can you explain this answer?
Heavy advertisement expenditure should be treated as :
a)
Deferred Revenue Expenditure
b)
Revenue expenditure
c)
Capital Expenditure
d)
None of these.
|
Jayant Mishra answered |
Deferred Revenue Expenditure
Description: Deferred revenue expenditure is that expenditure for which payment has been made or a liability incurred but which is carried forward on the presumption that it will be of benefit over a subsequent period or periods. Heavy advertisement expenditure is the expenditure made in the present which will benefit the organization in the future upcoming years and hence it is a deferred revenue expenditure.
Rs. 2500, spent on the overhauling on purchase of second hand machinery: - a)Capital expenditure
- b)Revenue expenditure
- c)Deferred revenue expenditure
- d)None of the above
Correct answer is 'A'. Can you explain this answer?
Rs. 2500, spent on the overhauling on purchase of second hand machinery:
a)
Capital expenditure
b)
Revenue expenditure
c)
Deferred revenue expenditure
d)
None of the above
|
Alok Mehta answered |
Rs. 2,500 spent on the overhauling on purchase of second hand machinery to put it in working condition and to derive endurable long- term advantage is a capital expenditure.
Classify the following expenditures and receipts as capital or revenue:Q.Entrance fee of Rs. 2,000 received by Ram and Shyam Social Club.- a)Capital receipt
- b)Revenue receipt
- c)Capital expenditures
- d)Revenue expenditures
Correct answer is option 'A'. Can you explain this answer?
Classify the following expenditures and receipts as capital or revenue:
Q.Entrance fee of Rs. 2,000 received by Ram and Shyam Social Club.
a)
Capital receipt
b)
Revenue receipt
c)
Capital expenditures
d)
Revenue expenditures
|
|
Poonam Reddy answered |
Entrance fee of Rs. 2000 received by social club is an example of capital receipt. This is the income flow from one of the following sources.
1. Cash from the sale of fixed assets
2. Cash from the sale of shares in the business
3. Cash from the issuance of a debt instrument which includes loans and bonds.
This should result either the reduction in government assets (sale of share, disinvestment) or increase in some liability (government borrowings).
‘A’ purchased a Car on 1.06.2010 for Rs. 5,60,000 and incurred Rs. 25,000 for repairs, etc. He paid Rs. 10,000 as insurance, Rs. 1,500 for petrol. What amount should be debited to Car A/c?- a)Rs. 5,60,000
- b)Rs. 5,96,500
- c)Rs. 5,95,000
- d)Rs. 5,85,000
Correct answer is 'B'. Can you explain this answer?
‘A’ purchased a Car on 1.06.2010 for Rs. 5,60,000 and incurred Rs. 25,000 for repairs, etc. He paid Rs. 10,000 as insurance, Rs. 1,500 for petrol. What amount should be debited to Car A/c?
a)
Rs. 5,60,000
b)
Rs. 5,96,500
c)
Rs. 5,95,000
d)
Rs. 5,85,000
|
|
Priya Patel answered |
All expenses incurred at the time of purchase of a capital asset or to bring the new capital asset in the working condition should be capitalised. The following expenses were incurred at the time of purchase of car:Cost of car Rs. 5,60,000Repairs Rs. 25,000 Insurance Rs. 10,000 Petrol Rs.1,500 Amount debited to Car A/c Rs. 5,96,500
A truck was purchased and after sometime, the name of the company was painted on it for advertisement purpose for Rs. 1,000/- this is:- a)Capital Expenditure
- b)Deferred Revenue Expenditure
- c)Revenue Expenditure
- d)None
Correct answer is option 'C'. Can you explain this answer?
A truck was purchased and after sometime, the name of the company was painted on it for advertisement purpose for Rs. 1,000/- this is:
a)
Capital Expenditure
b)
Deferred Revenue Expenditure
c)
Revenue Expenditure
d)
None
|
|
Rajat Patel answered |
A revenue expenditure is an amount that is expensed immediately—thereby being matched with revenues of the current accounting period. Routine repairs are revenue expenditures because they are charged directly to an account such as Repairs and Maintenance Expense.
Renewal fee for patent is a:- a)Capital expenditure
- b)Revenue expenditure
- c)Deferred revenue expenditure
- d)Development expenditure
Correct answer is 'B'. Can you explain this answer?
Renewal fee for patent is a:
a)
Capital expenditure
b)
Revenue expenditure
c)
Deferred revenue expenditure
d)
Development expenditure
|
|
Priya Patel answered |
Amount spent on renewal fee for patent right is a revenue expenditure.
An old machinery is purchased for Rs. 10,000. Installation charges of Rs. 1,000 were incurred. Repairs to the old machinery = Rs. 7,000 Repairs Account will be debited by: - a)Rs. 7,000
- b)Rs. 8,000
- c)Nil
- d)None of the above
Correct answer is option 'C'. Can you explain this answer?
An old machinery is purchased for Rs. 10,000. Installation charges of Rs. 1,000 were incurred. Repairs to the old machinery = Rs. 7,000 Repairs Account will be debited by:
a)
Rs. 7,000
b)
Rs. 8,000
c)
Nil
d)
None of the above
|
|
Stuti Desai answered |
Explanation:
When the old machinery is purchased, the cost of the machinery along with any additional expenses incurred to make it functional are recorded as the cost of the machinery. These expenses include installation charges, freight charges, etc.
In this case, the old machinery was purchased for Rs. 10,000 and installation charges of Rs. 1,000 were incurred. Therefore, the total cost of the machinery would be Rs. 11,000 (10,000 + 1,000).
However, repairs to the old machinery were also done which cost Rs. 7,000. Repairs are not considered as a part of the cost of the machinery. Repairs are expenses incurred to maintain the machinery in working condition. Hence, repairs account will be debited by nil.
Therefore, the correct option is C, i.e., nil.
To summarize:
• The cost of the machinery includes the purchase cost along with any additional expenses incurred to make it functional.
• Repairs to the machinery are not considered as a part of the cost of the machinery.
• Repairs account will be debited by nil.
When the old machinery is purchased, the cost of the machinery along with any additional expenses incurred to make it functional are recorded as the cost of the machinery. These expenses include installation charges, freight charges, etc.
In this case, the old machinery was purchased for Rs. 10,000 and installation charges of Rs. 1,000 were incurred. Therefore, the total cost of the machinery would be Rs. 11,000 (10,000 + 1,000).
However, repairs to the old machinery were also done which cost Rs. 7,000. Repairs are not considered as a part of the cost of the machinery. Repairs are expenses incurred to maintain the machinery in working condition. Hence, repairs account will be debited by nil.
Therefore, the correct option is C, i.e., nil.
To summarize:
• The cost of the machinery includes the purchase cost along with any additional expenses incurred to make it functional.
• Repairs to the machinery are not considered as a part of the cost of the machinery.
• Repairs account will be debited by nil.
A new machine was purchased in Delhi and brought to Jaipur factory site for installation. The machine was damaged during transit and repair expenses were incurred amounting to Rs. 20,000. Such repair will be treated as:
- a)Revenue expenses
- b)Capital expenditure
- c)Deferred revenue expenditure
- d)Reserve
Correct answer is option 'B'. Can you explain this answer?
A new machine was purchased in Delhi and brought to Jaipur factory site for installation. The machine was damaged during transit and repair expenses were incurred amounting to Rs. 20,000. Such repair will be treated as:
a)
Revenue expenses
b)
Capital expenditure
c)
Deferred revenue expenditure
d)
Reserve
|
|
Jayant Mishra answered |
Explanation: Capital expenditure is the amount spent on acquiring or improving long-term assets such as equipment, buildings or land. This type of expenditure is made with the aim of enhancing the productive life, capacity or efficiency of the asset. In this case, the machine was brought for installation in the factory, which implies that it was meant for long-term use for production purposes. The cost incurred for its repair due to damage during transit is therefore a capital expenditure because it is a once-off cost that will benefit the business in the long term.
Insurance claim received on account of machinery damaged completely by fire is- a)Capital receipt
- b)Revenue receipt
- c)Capital expenditures
- d)Revenue expenditures
Correct answer is option 'A'. Can you explain this answer?
Insurance claim received on account of machinery damaged completely by fire is
a)
Capital receipt
b)
Revenue receipt
c)
Capital expenditures
d)
Revenue expenditures
|
|
Jayant Mishra answered |
Capital receipts are a non-recurring incoming cash flow into your business, which leads to the creation of a liability (a debt to be paid in the future) and a decrease in company assets (resources that lead to capital gain).
Rs. 1,200 spent on the repairs of machine. - a)Capital expenditure
- b)Revenue expenditure
- c)Deferred revenue expenditure
- d)None of the above
Correct answer is option 'B'. Can you explain this answer?
Rs. 1,200 spent on the repairs of machine.
a)
Capital expenditure
b)
Revenue expenditure
c)
Deferred revenue expenditure
d)
None of the above
|
Sanjana Kumar answered |
A revenue expenditure is an amount that is expensed immediately—thereby being matched with revenues of the current accounting period. Routine repairs are revenue expenditures because they are charged directly to an account such as Repairs and Maintenance Expense.
Share Premium is a :- a)Capital Receipt
- b)Revenue Receipt
- c)Deferred Revenue Receipt
- d)None of these
Correct answer is option 'A'. Can you explain this answer?
Share Premium is a :
a)
Capital Receipt
b)
Revenue Receipt
c)
Deferred Revenue Receipt
d)
None of these
|
|
Jayant Mishra answered |
Share premium is a capital receipt as it is received occasionally when shares are issued and its usage is also restricted. It is shown on the liability side of the balance sheet. It is not in the nature of a regular income and hence its not a revenue receipt
A second hand car is purchased for Rs. 10,000 the amount of Rs. 1,000 is spent on its repairs, Rs. 500 is incurred to get the car registered in owner’s name and Rs. 1,200 is paid as dealer’s commission. The amount debited to car account will be
- a)Rs. 10,000
- b)Rs. 10,500
- c)Rs. 11,500
- d)Rs. 12,700
Correct answer is option 'D'. Can you explain this answer?
A second hand car is purchased for Rs. 10,000 the amount of Rs. 1,000 is spent on its repairs, Rs. 500 is incurred to get the car registered in owner’s name and Rs. 1,200 is paid as dealer’s commission. The amount debited to car account will be
a)
Rs. 10,000
b)
Rs. 10,500
c)
Rs. 11,500
d)
Rs. 12,700
|
|
Disha Joshi answered |
's name and Rs. 2,000 is spent on its insurance. If the owner wishes to earn 10% profit on his investment, what should be the selling price of the car?
Cost price of the car = Rs. 10,000
Expenses incurred = Rs. 1,000 + Rs. 500 + Rs. 2,000 = Rs. 3,500
Total cost price = Rs. 10,000 + Rs. 3,500 = Rs. 13,500
Profit required = 10% of Rs. 13,500 = Rs. 1,350
Selling price of the car = Cost price + Expenses + Profit
= Rs. 10,000 + Rs. 3,500 + Rs. 1,350
= Rs. 14,850
Therefore, the selling price of the car should be Rs. 14,850 to earn a 10% profit on the investment.
Cost price of the car = Rs. 10,000
Expenses incurred = Rs. 1,000 + Rs. 500 + Rs. 2,000 = Rs. 3,500
Total cost price = Rs. 10,000 + Rs. 3,500 = Rs. 13,500
Profit required = 10% of Rs. 13,500 = Rs. 1,350
Selling price of the car = Cost price + Expenses + Profit
= Rs. 10,000 + Rs. 3,500 + Rs. 1,350
= Rs. 14,850
Therefore, the selling price of the car should be Rs. 14,850 to earn a 10% profit on the investment.
Medium term loan obtained from bank for augmenting working capital is:- a)Revenue Expenditure
- b)Capital Expenditure
- c)Revenue Receipt
- d)Capital Receipt
Correct answer is option 'D'. Can you explain this answer?
Medium term loan obtained from bank for augmenting working capital is:
a)
Revenue Expenditure
b)
Capital Expenditure
c)
Revenue Receipt
d)
Capital Receipt
|
|
Jayant Mishra answered |
Receipts which are obtained in course of normal business activities are revenue receipts and all receipts other than revenue receipts are capital receipts. Securing of loan is not a normal business activity and hence medium term loan taken from bank for augmenting working capital is a capital receipt.
Paper purchased for use as stationery. - a)Capital expenditure
- b)Revenue expenditure
- c)Deferred revenue expenditure
- d)None of the above
Correct answer is option 'B'. Can you explain this answer?
Paper purchased for use as stationery.
a)
Capital expenditure
b)
Revenue expenditure
c)
Deferred revenue expenditure
d)
None of the above
|
Nandini Iyer answered |
A revenue expenditure is an amount that is expensed immediately—thereby being matched with revenues of the current accounting period. Routine repairs are revenue expenditures because they are charged directly to an account such as Repairs and Maintenance Expense.
Expenditure incurred of Rs. 20,000 for trial run of a newly installed machinery would be:- a)Preliminary expenditure
- b)Capital expenditure
- c)Revenue expenditure
- d)Deferred revenue expenditure
Correct answer is option 'B'. Can you explain this answer?
Expenditure incurred of Rs. 20,000 for trial run of a newly installed machinery would be:
a)
Preliminary expenditure
b)
Capital expenditure
c)
Revenue expenditure
d)
Deferred revenue expenditure
|
|
Arka Tiwari answered |
Classification of Expenditure
Expenditure can be classified into various types based on the nature and purpose of the expenditure. Some of the common types of expenditure include:
1. Capital Expenditure: Capital expenditure refers to the expenditure incurred for acquiring or improving a fixed asset or a long-term investment. It is expected to provide benefits for more than one accounting period.
2. Revenue Expenditure: Revenue expenditure refers to the expenditure incurred for the day-to-day operations of the business. It is expected to provide benefits for the current accounting period only.
3. Preliminary Expenditure: Preliminary expenditure refers to the expenditure incurred before the commencement of a business or before the start of commercial production. It includes expenses such as incorporation fees, legal fees, and expenses incurred for the preparation of a feasibility report.
4. Deferred Revenue Expenditure: Deferred revenue expenditure refers to the expenditure that is revenue in nature but its benefits are expected to be derived over a period of time. It is treated as an asset and is written off over a period of time.
Explanation
In the given question, the expenditure incurred of Rs. 20,000 is for the trial run of a newly installed machinery. This expenditure is incurred for testing the machinery and ensuring that it is working properly. As the expenditure is incurred for a capital asset, which is the newly installed machinery, it is classified as capital expenditure. The expenditure is expected to provide benefits for more than one accounting period as it is incurred for a long-term asset. Thus, the correct answer is option 'B' - capital expenditure.
Expenditure can be classified into various types based on the nature and purpose of the expenditure. Some of the common types of expenditure include:
1. Capital Expenditure: Capital expenditure refers to the expenditure incurred for acquiring or improving a fixed asset or a long-term investment. It is expected to provide benefits for more than one accounting period.
2. Revenue Expenditure: Revenue expenditure refers to the expenditure incurred for the day-to-day operations of the business. It is expected to provide benefits for the current accounting period only.
3. Preliminary Expenditure: Preliminary expenditure refers to the expenditure incurred before the commencement of a business or before the start of commercial production. It includes expenses such as incorporation fees, legal fees, and expenses incurred for the preparation of a feasibility report.
4. Deferred Revenue Expenditure: Deferred revenue expenditure refers to the expenditure that is revenue in nature but its benefits are expected to be derived over a period of time. It is treated as an asset and is written off over a period of time.
Explanation
In the given question, the expenditure incurred of Rs. 20,000 is for the trial run of a newly installed machinery. This expenditure is incurred for testing the machinery and ensuring that it is working properly. As the expenditure is incurred for a capital asset, which is the newly installed machinery, it is classified as capital expenditure. The expenditure is expected to provide benefits for more than one accounting period as it is incurred for a long-term asset. Thus, the correct answer is option 'B' - capital expenditure.
What is the difference between deferred revenue expenditure and prepaid expenses?- a)Accounting treatment
- b)Estimation of amount
- c)Benefit for more than one accounting period
- d)Nature of expenditure
Correct answer is option 'B'. Can you explain this answer?
What is the difference between deferred revenue expenditure and prepaid expenses?
a)
Accounting treatment
b)
Estimation of amount
c)
Benefit for more than one accounting period
d)
Nature of expenditure
|
|
Jayant Mishra answered |
This deferred expense will be reported on the balance sheet as a noncurrent or long-term asset. Often the term prepaid expense indicates that a payment was made less than one year before the cost is expensed. This prepaid expense is reported as a current asset.
Rs. 2,500 spent on the overhaul of machines purchased second-hand is- a)Capital expenditure
- b)Revenue expenditure
- c)Deferred revenue expenditure
- d)None of the above
Correct answer is option 'A'. Can you explain this answer?
Rs. 2,500 spent on the overhaul of machines purchased second-hand is
a)
Capital expenditure
b)
Revenue expenditure
c)
Deferred revenue expenditure
d)
None of the above
|
|
Alok Mehta answered |
Answer: (A) Capital expenditure
Description: Rs. 2,500 spent on the overhauling on purchase of second hand machinery to put it in working condition and to derive endurable long- term advantage is a capital expenditure.
Revenue Expenditure wrongly recorded as Capital Expenditure will result in:- a)Overstatement of net profit and understatement of assets
- b)Overstatement of net profit and overstatement of assets
- c)Understatement of net profit and overstatement of assets
- d)Understatement of net profit and understatement of assets
Correct answer is option 'B'. Can you explain this answer?
Revenue Expenditure wrongly recorded as Capital Expenditure will result in:
a)
Overstatement of net profit and understatement of assets
b)
Overstatement of net profit and overstatement of assets
c)
Understatement of net profit and overstatement of assets
d)
Understatement of net profit and understatement of assets
|
|
Nandini Iyer answered |
Revenue Expenditure are recorded as expense in P/L A/c whereas Capital Expenditure is shown as addition to assets. Thus, when revenue expenditure is wrongly recorded as Capital Expenditure, the net profit is overstated and assets are also overstated.
Classify the following expenditures and receipts as capital or revenue:Q.Insurance claim received on account of machinery damaged completely by fire.- a)Capital receipt
- b)Revenue receipt
- c)Capital expenditures
- d)Revenue expenditures
Correct answer is option 'A'. Can you explain this answer?
Classify the following expenditures and receipts as capital or revenue:
Q.Insurance claim received on account of machinery damaged completely by fire.
a)
Capital receipt
b)
Revenue receipt
c)
Capital expenditures
d)
Revenue expenditures
|
Janhavi Basu answered |
Classification of Expenditure and Receipts as Capital or Revenue
Capital Receipts: Receipts which do not arise from the regular course of business are known as capital receipts. They are of a non-recurring nature and are not included in the revenue of the business. Examples of capital receipts are sale of fixed assets, issue of shares, etc.
Revenue Receipts: Receipts which arise from the regular course of business are known as revenue receipts. They are recurring in nature and are included in the revenue of the business. Examples of revenue receipts are sales, rent received, commission received, etc.
Capital Expenditures: Expenditures which are incurred for acquiring fixed assets or increasing their earning capacity are known as capital expenditures. They are non-recurring in nature and are not charged to the revenue of the business. Examples of capital expenditures are purchase of land, building, machinery, etc.
Revenue Expenditures: Expenditures which are incurred for the normal day-to-day functioning of the business are known as revenue expenditures. They are recurring in nature and are charged to the revenue of the business. Examples of revenue expenditures are salaries and wages, rent, electricity bills, etc.
Answer
The insurance claim received on account of machinery damaged completely by fire is a capital receipt. This is because it does not arise from the regular course of business, and is of a non-recurring nature. The machinery was a fixed asset of the business, and the insurance claim received for its damage will be used to acquire a new machinery or repair the damaged one. Therefore, it is a capital receipt and not a revenue receipt.
Conclusion
In conclusion, it is important to classify expenditures and receipts as capital or revenue to determine their impact on the financial statements of a business. Capital receipts and expenditures are non-recurring in nature and do not affect the revenue of the business, while revenue receipts and expenditures are recurring in nature and are included in the revenue of the business.
Capital Receipts: Receipts which do not arise from the regular course of business are known as capital receipts. They are of a non-recurring nature and are not included in the revenue of the business. Examples of capital receipts are sale of fixed assets, issue of shares, etc.
Revenue Receipts: Receipts which arise from the regular course of business are known as revenue receipts. They are recurring in nature and are included in the revenue of the business. Examples of revenue receipts are sales, rent received, commission received, etc.
Capital Expenditures: Expenditures which are incurred for acquiring fixed assets or increasing their earning capacity are known as capital expenditures. They are non-recurring in nature and are not charged to the revenue of the business. Examples of capital expenditures are purchase of land, building, machinery, etc.
Revenue Expenditures: Expenditures which are incurred for the normal day-to-day functioning of the business are known as revenue expenditures. They are recurring in nature and are charged to the revenue of the business. Examples of revenue expenditures are salaries and wages, rent, electricity bills, etc.
Answer
The insurance claim received on account of machinery damaged completely by fire is a capital receipt. This is because it does not arise from the regular course of business, and is of a non-recurring nature. The machinery was a fixed asset of the business, and the insurance claim received for its damage will be used to acquire a new machinery or repair the damaged one. Therefore, it is a capital receipt and not a revenue receipt.
Conclusion
In conclusion, it is important to classify expenditures and receipts as capital or revenue to determine their impact on the financial statements of a business. Capital receipts and expenditures are non-recurring in nature and do not affect the revenue of the business, while revenue receipts and expenditures are recurring in nature and are included in the revenue of the business.
If repairs of Rs. 100 are done on a machinery then which account will be debited?- a)Machinery A/c
- b)Repairs A/c
- c)Capital A/c
- d)Wages A/c
Correct answer is option 'B'. Can you explain this answer?
If repairs of Rs. 100 are done on a machinery then which account will be debited?
a)
Machinery A/c
b)
Repairs A/c
c)
Capital A/c
d)
Wages A/c
|
|
Jayant Mishra answered |
Expenses incurred at the time of purchase of assets on its installation are debited to the asset account. Repairs whereas are done after the asset is put to use, hence, it will not be added to the cost of the asset.
It is a part of revenue expenditure.
Repairs A/c Dr. 100 To Cash A/c 100
(Cash paid for the repairs made to Machinery)
Subsidy of Rs. 40,000 received from the government for working capital by a manufacturing concern is- a)Capital receipt
- b)Revenue receipt
- c)Capital expenditures
- d)Revenue expenditures
Correct answer is option 'B'. Can you explain this answer?
Subsidy of Rs. 40,000 received from the government for working capital by a manufacturing concern is
a)
Capital receipt
b)
Revenue receipt
c)
Capital expenditures
d)
Revenue expenditures
|
|
Rajat Patel answered |
Revenue Receipt:
Receipts which are recurring (received again and again) by nature and which are available for meeting all day to day expenses (revenue expenditure) of a business concern are known as "Revenue receipts", e.g. sale proceeds of goods, interest received, commission received, rent received, dividend received etc.
Preliminary Expenses are an example of : - a)Revenue Expenditure
- b)Capital Expenditure
- c)Deferred Revenue Expenditure
- d)All of these
Correct answer is 'C'. Can you explain this answer?
Preliminary Expenses are an example of :
a)
Revenue Expenditure
b)
Capital Expenditure
c)
Deferred Revenue Expenditure
d)
All of these
|
|
Kavita Joshi answered |
Preliminary expenses are an example of deferred revenue expenditure. Deferred revenue expenses are those expenses, the benefit of which can be extended to a number of years say, 3 to 5 years. These are to be charged to profit and loss account, over a period of 3 to 5 years depending upon the benefit accrued. These are of revenue nature but are deferred or postponed. "It is of quasi capital nature".
If repair cost is Rs. 25,000, whitewash expenses are Rs. 5,000, cost of extension of building is Rs. 2,50,000 and cost of improvement in electrical wiring system is Rs. 19,000; the amount to be expensed is - a)Rs. 30,000
- b)Rs. 44,000
- c)Rs. 2,99,000
- d)Rs. 49,000
Correct answer is option 'C'. Can you explain this answer?
If repair cost is Rs. 25,000, whitewash expenses are Rs. 5,000, cost of extension of building is Rs. 2,50,000 and cost of improvement in electrical wiring system is Rs. 19,000; the amount to be expensed is
a)
Rs. 30,000
b)
Rs. 44,000
c)
Rs. 2,99,000
d)
Rs. 49,000
|
Nilanjan Saha answered |
Repair cost = 25000
Whitewash expenses = 5000
cost of extension building = 250000
Cost of improvement in electric wiring system = 19000
Total expenses = a. 2,99,000
Whitewash expenses = 5000
cost of extension building = 250000
Cost of improvement in electric wiring system = 19000
Total expenses = a. 2,99,000
Advertising campaign to launch a new product. - a)Capital expenditure
- b)Revenue expenditure
- c)Deferred revenue expenditure
- d)None of the above
Correct answer is option 'C'. Can you explain this answer?
Advertising campaign to launch a new product.
a)
Capital expenditure
b)
Revenue expenditure
c)
Deferred revenue expenditure
d)
None of the above
|
|
Arun Khanna answered |
Deferred Revenue Expenditure is an expenditure which is revenue in nature and incurred during an accounting period, but its benefits are to be derived in multiple future accounting periods.
An amount of Rs. 30,000 spent on traveling expenses of the company’s director’s to a foreign trip for purchase of an asset to be used in the production process. This is a:- a)Capital expenditure
- b)Revenue expenditure
- c)Deferred revenue expenditure
- d)None of the above
Correct answer is option 'A'. Can you explain this answer?
An amount of Rs. 30,000 spent on traveling expenses of the company’s director’s to a foreign trip for purchase of an asset to be used in the production process. This is a:
a)
Capital expenditure
b)
Revenue expenditure
c)
Deferred revenue expenditure
d)
None of the above
|
|
Mihir Banerjee answered |
Employees.
Classify the following expenditures and receipts as capital or revenue:Q.Subsidy of Rs. 40,000 received from the government by a manufacturing concern.- a)Capital receipt
- b)Revenue receipt
- c)Capital expenditures
- d)Revenue expenditures
Correct answer is option 'B'. Can you explain this answer?
Classify the following expenditures and receipts as capital or revenue:
Q.Subsidy of Rs. 40,000 received from the government by a manufacturing concern.
a)
Capital receipt
b)
Revenue receipt
c)
Capital expenditures
d)
Revenue expenditures
|
|
Malavika Basak answered |
Classification of Expenditures and Receipts
Capital and revenue expenditures and receipts are two types of transactions that occur in the business world. The classification of these transactions is critical in determining the financial position and performance of a company. The following is an explanation of the classification of expenditures and receipts.
Capital Receipts vs. Revenue Receipts
Capital receipts are non-recurring transactions that do not affect the profitability of a company. They are primarily related to the acquisition or disposal of capital assets. For example, the sale of property, plant, and equipment (PP&E) is a capital receipt. Additionally, any capital contributions from shareholders or long-term loans are considered capital receipts.
Revenue receipts, on the other hand, are recurring transactions that affect the profitability of a company. They are derived from the ordinary course of business and include sales revenue, interest income, and rent received. Government grants, subsidies, and donations are also considered revenue receipts.
Subsidy Received by a Manufacturing Concern
The subsidy of Rs. 40,000 received from the government by a manufacturing concern is a revenue receipt. This is because subsidies are given by the government to support the operations of a company, and they do not affect the capital structure of the company. The subsidy is not related to the acquisition or disposal of capital assets, nor is it a contribution from shareholders or a long-term loan.
Conclusion
In conclusion, the classification of expenditures and receipts is crucial in determining the financial position and performance of a company. Capital receipts and expenditures are related to the acquisition or disposal of capital assets, while revenue receipts and expenditures are related to the ordinary course of business. The subsidy of Rs. 40,000 received from the government by a manufacturing concern is a revenue receipt.
Capital and revenue expenditures and receipts are two types of transactions that occur in the business world. The classification of these transactions is critical in determining the financial position and performance of a company. The following is an explanation of the classification of expenditures and receipts.
Capital Receipts vs. Revenue Receipts
Capital receipts are non-recurring transactions that do not affect the profitability of a company. They are primarily related to the acquisition or disposal of capital assets. For example, the sale of property, plant, and equipment (PP&E) is a capital receipt. Additionally, any capital contributions from shareholders or long-term loans are considered capital receipts.
Revenue receipts, on the other hand, are recurring transactions that affect the profitability of a company. They are derived from the ordinary course of business and include sales revenue, interest income, and rent received. Government grants, subsidies, and donations are also considered revenue receipts.
Subsidy Received by a Manufacturing Concern
The subsidy of Rs. 40,000 received from the government by a manufacturing concern is a revenue receipt. This is because subsidies are given by the government to support the operations of a company, and they do not affect the capital structure of the company. The subsidy is not related to the acquisition or disposal of capital assets, nor is it a contribution from shareholders or a long-term loan.
Conclusion
In conclusion, the classification of expenditures and receipts is crucial in determining the financial position and performance of a company. Capital receipts and expenditures are related to the acquisition or disposal of capital assets, while revenue receipts and expenditures are related to the ordinary course of business. The subsidy of Rs. 40,000 received from the government by a manufacturing concern is a revenue receipt.
XYZ Limited has a house for 3 years. It used it as guest house. Now it incurred an expenditure for Rs. 2,50,000 for repairing the roof of this house. Expenses incurred on such repairs are:-
- a)Capital Expenditure
- b)Deferred Revenue Expenditure
- c)Revenue Expenditure
- d)None of the above.
Correct answer is option 'C'. Can you explain this answer?
XYZ Limited has a house for 3 years. It used it as guest house. Now it incurred an expenditure for Rs. 2,50,000 for repairing the roof of this house. Expenses incurred on such repairs are:-
a)
Capital Expenditure
b)
Deferred Revenue Expenditure
c)
Revenue Expenditure
d)
None of the above.
|
|
Priya Patel answered |
Revenue Expenditure
Expenditure incurred on repairs of an existing asset, such as a house, is considered as revenue expenditure. Revenue expenditure is incurred in the normal course of business and is incurred to maintain the existing level of operations. In this case, XYZ Limited incurred an expenditure of Rs. 2,50,000 for repairing the roof of a house that it has owned for 3 years, which is used as a guest house. This expenditure is incurred to maintain the house and keep it in a usable condition, rather than adding to its value.
Capital expenditure, on the other hand, is incurred to acquire or improve an asset, such as buying a new house or building an extension to an existing one.
Deferred Revenue Expenditure is a type of expenditure which provides benefits over a number of accounting periods. In this case, the expenditure is incurred only once.
So, the answer is option 3 "Revenue Expenditure"
Which of the following is a revenue expenditure ?- a)Freight paid on purchase of plant and machinery
- b)Legal expenses paid to acquire a property
- c)Annual white wash of the factory building
- d)Expenses incurred to reduce working capital requirement
Correct answer is option 'C'. Can you explain this answer?
Which of the following is a revenue expenditure ?
a)
Freight paid on purchase of plant and machinery
b)
Legal expenses paid to acquire a property
c)
Annual white wash of the factory building
d)
Expenses incurred to reduce working capital requirement
|
Samiksha Nair answered |
Well to find out that which one of is a revenue expenditure we hve to frst understand that what is revenue expenditure...so in revenue expenditure the benefits is received with an accounting year so its effect is temporary, neither an asset is required nor the value of an asset is increased and it reduces the profit of the business..now coming to the question.. so basically whitewashing of a building is necessary for its(building of factory) maintenance and bcz of this expenditure the profit earning capacity of the business has not increased so it is revenue expenditure...(bcz the expense is incurred for the maintenance of the structure)
Classify the following expenditures and receipts as capital or revenue:Q.Amount of Rs. 5,000 spent as lawyers’ fee to defend a suit claiming that the firm’s factory site belonged to the plaintiff’s land.- a)Capital expenditures
- b)Revenue expenditures
- c)Deferred revenue expenditures
- d)None of the above
Correct answer is option 'B'. Can you explain this answer?
Classify the following expenditures and receipts as capital or revenue:
Q.Amount of Rs. 5,000 spent as lawyers’ fee to defend a suit claiming that the firm’s factory site belonged to the plaintiff’s land.
a)
Capital expenditures
b)
Revenue expenditures
c)
Deferred revenue expenditures
d)
None of the above
|
|
Gaurav Chatterjee answered |
Expenditure: Rs. 5,000 spent as Lawyer's fee to defend a suit claiming that the firm's factory site belonged to the plaintiff's land.
Revenue expenditures are those expenditures that are incurred for the purpose of generating revenue or maintaining the revenue-earning capacity of the business. They are recurring in nature and are charged to the profit and loss account. Capital expenditures, on the other hand, are those expenditures that are incurred for acquiring, improving, or maintaining fixed assets. They are non-recurring in nature and are charged to the balance sheet.
In this case, the amount of Rs. 5,000 spent as lawyers fee to defend a suit is a revenue expenditure. This is because:
- It is incurred for the purpose of maintaining the revenue-earning capacity of the business. If the plaintiff's claim had been successful, the firm would have lost its factory site, which would have affected its revenue-earning capacity.
- It is a recurring expenditure, as the firm may face similar suits in the future.
- It is charged to the profit and loss account, as it is a revenue expenditure.
Therefore, the correct answer is option B - Revenue expenditures.
Revenue expenditures are those expenditures that are incurred for the purpose of generating revenue or maintaining the revenue-earning capacity of the business. They are recurring in nature and are charged to the profit and loss account. Capital expenditures, on the other hand, are those expenditures that are incurred for acquiring, improving, or maintaining fixed assets. They are non-recurring in nature and are charged to the balance sheet.
In this case, the amount of Rs. 5,000 spent as lawyers fee to defend a suit is a revenue expenditure. This is because:
- It is incurred for the purpose of maintaining the revenue-earning capacity of the business. If the plaintiff's claim had been successful, the firm would have lost its factory site, which would have affected its revenue-earning capacity.
- It is a recurring expenditure, as the firm may face similar suits in the future.
- It is charged to the profit and loss account, as it is a revenue expenditure.
Therefore, the correct answer is option B - Revenue expenditures.
Which of the following statement is false?- a)Expenses in connection with obtaining a licence for running the Cinema is Capital expenditure
- b)Heavy advertisement expenses to introduce a new product is deferred revenue expenditure
- c)Cost of construction of building including cost of temporary huts for storing building materials is capital expenditure
- d)The cost of Rings and Pistons of an engine changed to increase its fuel efficiency is revenue expenditure
Correct answer is option 'D'. Can you explain this answer?
Which of the following statement is false?
a)
Expenses in connection with obtaining a licence for running the Cinema is Capital expenditure
b)
Heavy advertisement expenses to introduce a new product is deferred revenue expenditure
c)
Cost of construction of building including cost of temporary huts for storing building materials is capital expenditure
d)
The cost of Rings and Pistons of an engine changed to increase its fuel efficiency is revenue expenditure
|
|
Snehal Das answered |
False Statement: The cost of Rings and Pistons of an engine changed to increase its fuel efficiency is revenue expenditure.
Explanation:
To understand why option D is false, we need to first understand the difference between capital expenditure and revenue expenditure.
Capital Expenditure: Capital expenditure is the expenditure incurred for acquiring or improving a long-term asset, which will benefit the business for more than one accounting period. Capital expenditure is recorded on the balance sheet as an asset and is depreciated over its useful life.
Revenue Expenditure: Revenue expenditure is the expenditure incurred in the normal course of business and is charged to the income statement as an expense. Revenue expenditure is incurred to maintain or improve the existing assets and is not expected to provide benefits beyond the current accounting period.
Now, let's look at the given options:
a) Expenses in connection with obtaining a licence for running the Cinema is Capital expenditure: This is true as obtaining a license is a one-time expense that will benefit the business for more than one accounting period.
b) Heavy advertisement expenses to introduce a new product is deferred revenue expenditure: This is true as heavy advertisement expenses are incurred to launch a new product and are expected to provide benefits beyond the current accounting period.
c) Cost of construction of the building including the cost of temporary huts for storing building materials is capital expenditure: This is true as the construction of a building is a long-term asset that will benefit the business for more than one accounting period.
d) The cost of Rings and Pistons of an engine changed to increase its fuel efficiency is revenue expenditure: This is false as the replacement of rings and pistons in an engine is done to improve or maintain the existing asset and is not expected to provide benefits beyond the current accounting period. Hence, it is a capital expenditure.
Conclusion:
The false statement is option D because the replacement of rings and pistons in an engine is a capital expenditure as it is done to improve or maintain the existing asset and is not expected to provide benefits beyond the current accounting period.
Explanation:
To understand why option D is false, we need to first understand the difference between capital expenditure and revenue expenditure.
Capital Expenditure: Capital expenditure is the expenditure incurred for acquiring or improving a long-term asset, which will benefit the business for more than one accounting period. Capital expenditure is recorded on the balance sheet as an asset and is depreciated over its useful life.
Revenue Expenditure: Revenue expenditure is the expenditure incurred in the normal course of business and is charged to the income statement as an expense. Revenue expenditure is incurred to maintain or improve the existing assets and is not expected to provide benefits beyond the current accounting period.
Now, let's look at the given options:
a) Expenses in connection with obtaining a licence for running the Cinema is Capital expenditure: This is true as obtaining a license is a one-time expense that will benefit the business for more than one accounting period.
b) Heavy advertisement expenses to introduce a new product is deferred revenue expenditure: This is true as heavy advertisement expenses are incurred to launch a new product and are expected to provide benefits beyond the current accounting period.
c) Cost of construction of the building including the cost of temporary huts for storing building materials is capital expenditure: This is true as the construction of a building is a long-term asset that will benefit the business for more than one accounting period.
d) The cost of Rings and Pistons of an engine changed to increase its fuel efficiency is revenue expenditure: This is false as the replacement of rings and pistons in an engine is done to improve or maintain the existing asset and is not expected to provide benefits beyond the current accounting period. Hence, it is a capital expenditure.
Conclusion:
The false statement is option D because the replacement of rings and pistons in an engine is a capital expenditure as it is done to improve or maintain the existing asset and is not expected to provide benefits beyond the current accounting period.
Classify the following expenditures and receipts as capital or revenue:Q.Money spent Rs. 10,000 as traveling expenses of the directors on trips abroad for purchase of capital assets is - a)Capital expenditures
- b)Revenue expenditures
- c)Deferred revenue expenditures
- d)None of the above
Correct answer is option 'A'. Can you explain this answer?
Classify the following expenditures and receipts as capital or revenue:
Q.Money spent Rs. 10,000 as traveling expenses of the directors on trips abroad for purchase of capital assets is
a)
Capital expenditures
b)
Revenue expenditures
c)
Deferred revenue expenditures
d)
None of the above
|
|
Jatin Mehta answered |
Classification of Expenditures and Receipts
Capital Expenditures
- Expenses incurred for acquiring or improving a long-term asset
- Expected to provide benefits over several accounting periods
- Recorded as an asset on the balance sheet
Revenue Expenditures
- Expenses incurred for the day-to-day operations of the business
- Expected to provide benefits only for the current accounting period
- Recorded as an expense on the income statement
Deferred Revenue Expenditures
- Expenses incurred for the benefit of more than one accounting period
- Apportioned over the accounting periods benefited
- Recorded as an asset on the balance sheet and expensed over time
Answer Explanation
In the given scenario, the money spent on traveling expenses of directors on trips abroad for the purchase of capital assets is classified as a capital expenditure. This is because the purpose of the traveling expenses was to acquire capital assets, which are long-term assets that will provide benefits over several accounting periods. The expenses incurred for the acquisition of these assets are recorded as an asset on the balance sheet and are not expensed immediately.
Therefore, the correct answer is option 'A' - Capital Expenditures.
Capital Expenditures
- Expenses incurred for acquiring or improving a long-term asset
- Expected to provide benefits over several accounting periods
- Recorded as an asset on the balance sheet
Revenue Expenditures
- Expenses incurred for the day-to-day operations of the business
- Expected to provide benefits only for the current accounting period
- Recorded as an expense on the income statement
Deferred Revenue Expenditures
- Expenses incurred for the benefit of more than one accounting period
- Apportioned over the accounting periods benefited
- Recorded as an asset on the balance sheet and expensed over time
Answer Explanation
In the given scenario, the money spent on traveling expenses of directors on trips abroad for the purchase of capital assets is classified as a capital expenditure. This is because the purpose of the traveling expenses was to acquire capital assets, which are long-term assets that will provide benefits over several accounting periods. The expenses incurred for the acquisition of these assets are recorded as an asset on the balance sheet and are not expensed immediately.
Therefore, the correct answer is option 'A' - Capital Expenditures.
Deferred Revenue Expenditure to the extent of not written off, is shown in Balance Sheet under the head:-- a)Miscellaneous Expenditure
- b)Capital
- c)Current Liabilities
- d)Fixed Assets.
Correct answer is option 'A'. Can you explain this answer?
Deferred Revenue Expenditure to the extent of not written off, is shown in Balance Sheet under the head:-
a)
Miscellaneous Expenditure
b)
Capital
c)
Current Liabilities
d)
Fixed Assets.
|
|
Priya Patel answered |
Deferred Revenue Expenditure is that expenditure that is for the time being deferred from being charged against income. So long as deferred revenue expenditure has not written off, this is shown on the asset side of the Balance Sheet under the head "Miscellaneous expenditure".
Classify the following expenditures and receipts as capital or revenue:Q.If repair cost is Rs. 25,000, whitewash expenses are Rs. 5,000, cost of extension of building is Rs. 2,50,000 and cost of improvement in electrical wiring system is Rs. 19,000; the amount to be expensed is - a)Rs. 2,99,000.
- b)Rs. 44,000.
- c)Rs. 30,000.
- d)Rs. 49,000.
Correct answer is 'C'. Can you explain this answer?
Classify the following expenditures and receipts as capital or revenue:
Q.If repair cost is Rs. 25,000, whitewash expenses are Rs. 5,000, cost of extension of building is Rs. 2,50,000 and cost of improvement in electrical wiring system is Rs. 19,000; the amount to be expensed is
a)
Rs. 2,99,000.
b)
Rs. 44,000.
c)
Rs. 30,000.
d)
Rs. 49,000.
|
|
Niharika Joshi answered |
Classification of Expenditures:
1. Repair cost - Revenue Expenditure
2. Whitewash expenses - Revenue Expenditure
3. Cost of extension of building - Capital Expenditure
4. Cost of improvement in electrical wiring system - Capital Expenditure
Calculation of Amount to be Expensed:
The amount to be expensed is the total of revenue expenditures, which are repair cost and whitewash expenses. Hence,
Total Amount to be Expensed = Repair Cost + Whitewash Expenses
= Rs. 25,000 + Rs. 5,000
= Rs. 30,000
Therefore, the correct option is (c) Rs. 30,000.
1. Repair cost - Revenue Expenditure
2. Whitewash expenses - Revenue Expenditure
3. Cost of extension of building - Capital Expenditure
4. Cost of improvement in electrical wiring system - Capital Expenditure
Calculation of Amount to be Expensed:
The amount to be expensed is the total of revenue expenditures, which are repair cost and whitewash expenses. Hence,
Total Amount to be Expensed = Repair Cost + Whitewash Expenses
= Rs. 25,000 + Rs. 5,000
= Rs. 30,000
Therefore, the correct option is (c) Rs. 30,000.
What is the difference between deferred revenue expenditure and prepaid expenses?- a)Accounting treatment
- b)Estimation of amount
- c)Benefit for more than one accounting period
- d)Nature of expenditure
Correct answer is option 'B'. Can you explain this answer?
What is the difference between deferred revenue expenditure and prepaid expenses?
a)
Accounting treatment
b)
Estimation of amount
c)
Benefit for more than one accounting period
d)
Nature of expenditure
|
Rahul Chaudhary answered |
The difference between deferred revenue expenditure and prepaid expenses is estimation of amount is correct because the amounts of both the terms are not written equal. the prepaid expenses is double than deffered so, deffered means expenses which have occurred in future means - future payments of an company. whereas on other side prepaid expenses are the expenses which are paid in advance means double than deffered payment expenditure.
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Machinery was purchased for Rs. 10,000 and Rs. 500 paid as wages for erection of machinery? The account that should be debited is : - a)Wages A/c
- b)Machinery A/c
- c)Repairs A/c
- d)None
Correct answer is option 'B'. Can you explain this answer?
Machinery was purchased for Rs. 10,000 and Rs. 500 paid as wages for erection of machinery? The account that should be debited is :
a)
Wages A/c
b)
Machinery A/c
c)
Repairs A/c
d)
None
|
|
Arnab Nambiar answered |
Debit and Credit are two basic terms of accounting. When a transaction takes place, it affects at least two accounts. One account is debited while another account is credited. In this case, machinery was purchased for Rs. 10,000 and Rs. 500 paid as wages for erection of machinery. The account that should be debited is Machinery A/c.
Explanation:
Machinery is an asset. Assets are the resources owned by the business which are used for generating revenue. The purchase of machinery for Rs. 10,000 is a capital expenditure. Capital expenditures are those expenditures that are incurred for acquiring fixed assets or increasing their earning capacity. As machinery is a fixed asset, it is debited to Machinery A/c.
Wages are the expenses incurred by the business for the services rendered by the employees. The wages paid for the erection of machinery are revenue expenditures. Revenue expenditures are those expenditures that are incurred for maintaining the earning capacity of the business. As wages are an expense, it is debited to Wages A/c.
Hence, the correct answer is Machinery A/c.
Explanation:
Machinery is an asset. Assets are the resources owned by the business which are used for generating revenue. The purchase of machinery for Rs. 10,000 is a capital expenditure. Capital expenditures are those expenditures that are incurred for acquiring fixed assets or increasing their earning capacity. As machinery is a fixed asset, it is debited to Machinery A/c.
Wages are the expenses incurred by the business for the services rendered by the employees. The wages paid for the erection of machinery are revenue expenditures. Revenue expenditures are those expenditures that are incurred for maintaining the earning capacity of the business. As wages are an expense, it is debited to Wages A/c.
Hence, the correct answer is Machinery A/c.
Subsidy of Rs. 40,000 received from the government for working capital by a manufacturing concern is- a)Capital receipt
- b)Revenue receipt
- c)Capital expenditures
- d)Revenue expenditures
Correct answer is option 'B'. Can you explain this answer?
Subsidy of Rs. 40,000 received from the government for working capital by a manufacturing concern is
a)
Capital receipt
b)
Revenue receipt
c)
Capital expenditures
d)
Revenue expenditures
|
|
Arun Khanna answered |
Revenue Receipt:
Receipts which are recurring (received again and again) by nature and which are available for meeting all day to day expenses (revenue expenditure) of a business concern are known as "Revenue receipts", e.g. sale proceeds of goods, interest received, commission received, rent received, dividend received etc.
X limited spent Rs. 10,00,000 towards construction of office building. It also spent Rs. 50,000 towards construction of temporary store and used the store for building construction purpose. On completion of building construction the store was dismantled and the materials were sold for Rs. 20,000. Mr. A, a supervisor was paid Rs. 60,000 as his salary during the period of construction and he devoted 2/3rd of his time for the building construction. The capitalized cost of office building was:- a)Rs. 10,00,000
- b)Rs. 11,10,000
- c)Rs. 10,90,000
- d)Rs.10,70,000
Correct answer is option 'D'. Can you explain this answer?
X limited spent Rs. 10,00,000 towards construction of office building. It also spent Rs. 50,000 towards construction of temporary store and used the store for building construction purpose. On completion of building construction the store was dismantled and the materials were sold for Rs. 20,000. Mr. A, a supervisor was paid Rs. 60,000 as his salary during the period of construction and he devoted 2/3rd of his time for the building construction. The capitalized cost of office building was:
a)
Rs. 10,00,000
b)
Rs. 11,10,000
c)
Rs. 10,90,000
d)
Rs.10,70,000
|
|
Bhau Pekhale answered |
D
Capital expenditure provide ………………….benefit: - a)Short period
- b)Long period
- c)Very short period
- d)None
Correct answer is option 'B'. Can you explain this answer?
Capital expenditure provide ………………….benefit:
a)
Short period
b)
Long period
c)
Very short period
d)
None
|
|
Arka Kaur answered |
Long-term benefits to a company and are usually investments in fixed assets such as property, plant, and equipment. These expenditures are typically made with the intention of generating future revenue and improving the company's overall efficiency and productivity.
Capital expenditures can provide a number of benefits to a company, including:
1. Increased production capacity: Investments in new equipment or facilities can increase a company's ability to produce goods or services, allowing it to meet growing demand and increase revenue.
2. Improved efficiency: Upgrading equipment or facilities can improve efficiency, reducing costs and increasing profitability.
3. Enhanced competitiveness: Investing in new technology or facilities can help a company stay competitive in its industry and attract new customers.
4. Long-term cost savings: Capital expenditures may require a significant upfront investment, but over time they can result in significant cost savings, such as reduced maintenance costs or lower energy consumption.
Overall, capital expenditures can help a company achieve long-term growth and success by providing the tools and resources needed to compete and thrive in a constantly evolving business landscape.
Capital expenditures can provide a number of benefits to a company, including:
1. Increased production capacity: Investments in new equipment or facilities can increase a company's ability to produce goods or services, allowing it to meet growing demand and increase revenue.
2. Improved efficiency: Upgrading equipment or facilities can improve efficiency, reducing costs and increasing profitability.
3. Enhanced competitiveness: Investing in new technology or facilities can help a company stay competitive in its industry and attract new customers.
4. Long-term cost savings: Capital expenditures may require a significant upfront investment, but over time they can result in significant cost savings, such as reduced maintenance costs or lower energy consumption.
Overall, capital expenditures can help a company achieve long-term growth and success by providing the tools and resources needed to compete and thrive in a constantly evolving business landscape.
Medium term loan obtained from bank for augmenting working capital is:- a)Revenue Expenditure
- b)Capital Expenditure
- c)Revenue Receipt
- d)Capital Receipt
Correct answer is option 'D'. Can you explain this answer?
Medium term loan obtained from bank for augmenting working capital is:
a)
Revenue Expenditure
b)
Capital Expenditure
c)
Revenue Receipt
d)
Capital Receipt
|
|
Arun Khanna answered |
Receipts which are obtained in course of normal business activities are revenue receipts and all receipts other than revenue receipts are capital receipts. Securing of loan is not a normal business activity and hence medium term loan taken from bank for augmenting working capital is a capital receipt.
Money spent Rs. 10,000 as traveling expenses of the directors on trips abroad for purchase of capital assets is - a)Capital expenditures
- b)Revenue expenditures
- c)Deferred revenue expenditures
- d)None of the above
Correct answer is option 'A'. Can you explain this answer?
Money spent Rs. 10,000 as traveling expenses of the directors on trips abroad for purchase of capital assets is
a)
Capital expenditures
b)
Revenue expenditures
c)
Deferred revenue expenditures
d)
None of the above
|
|
Aarya Sharma answered |
Capital expenditures are the expenses incurred to acquire or improve a long-term asset such as property, plant, and equipment. In this case, the money spent on traveling expenses of the directors for trips abroad to purchase capital assets qualifies as capital expenditures.
Reasons why the given expense is classified as capital expenditure:
1. Acquiring long-term assets: The expense is incurred for purchasing capital assets, which are long-term assets that are expected to provide benefits to the company for a period of more than one year.
2. Enhancing the asset's value: The expense incurred on traveling is directly related to the purchase of capital assets, which will enhance the value of the company's assets.
3. Future economic benefits: The purchase of capital assets will provide future economic benefits to the company.
4. Non-recurring: Such expenses are non-recurring in nature and are not incurred on a regular basis.
Therefore, the money spent on traveling expenses of the directors on trips abroad for the purchase of capital assets is classified as a capital expenditure.
Reasons why the given expense is classified as capital expenditure:
1. Acquiring long-term assets: The expense is incurred for purchasing capital assets, which are long-term assets that are expected to provide benefits to the company for a period of more than one year.
2. Enhancing the asset's value: The expense incurred on traveling is directly related to the purchase of capital assets, which will enhance the value of the company's assets.
3. Future economic benefits: The purchase of capital assets will provide future economic benefits to the company.
4. Non-recurring: Such expenses are non-recurring in nature and are not incurred on a regular basis.
Therefore, the money spent on traveling expenses of the directors on trips abroad for the purchase of capital assets is classified as a capital expenditure.
A bad debt recovered during the year. - a)Capital expenditures
- b)Revenue expenditures
- c)Capital receipt
- d)Revenue receipt
Correct answer is option 'D'. Can you explain this answer?
A bad debt recovered during the year.
a)
Capital expenditures
b)
Revenue expenditures
c)
Capital receipt
d)
Revenue receipt
|
|
Priya Patel answered |
Under the allowance method, if a specific customer's accounts receivable is identified as uncollectible, it is written off by removing the amount from Accounts Receivable. The entry to write off a bad account affects only balance sheet accounts:
1) Debit - Allowance for Doubtful Accounts.
Credit - Accounts Receivable.
After a seller has written off an accounts receivable, it is possible that the seller is paid part or all of the account balance that was written off. Under the allowance method, if such a payment is received (whether directly from the customer or as a result of a court action) the seller will take the following two steps:
A) Debit - Accounts Receivable.
Credit - Allowance for Doubtful Accounts.
B) Debit - Cash or Bank
Credit - Accounts Receivable
Therefore, The receipt is called as Revenue Receipt.
Capital Receipts are represented in : - a)Balance Sheet
- b)Trading account
- c)Profit & Loss A/c
- d)Manufacturing A/c
Correct answer is option 'A'. Can you explain this answer?
Capital Receipts are represented in :
a)
Balance Sheet
b)
Trading account
c)
Profit & Loss A/c
d)
Manufacturing A/c
|
|
Rajat Patel answered |
Capital receipts are represented in Balance Sheet of the liability side. A reasonable portion out of it is transferred to Profit and Loss Account of each year i.e. it is recognized as income.
Capital Receipts are represented in : - a)Balance Sheet
- b)Trading account
- c)Profit & Loss A/c
- d)Manufacturing A/c
Correct answer is option 'A'. Can you explain this answer?
Capital Receipts are represented in :
a)
Balance Sheet
b)
Trading account
c)
Profit & Loss A/c
d)
Manufacturing A/c
|
|
Rajat Patel answered |
Capital receipts are represented in Balance Sheet of the liability side. A reasonable portion out of it is transferred to Profit and Loss Account of each year i.e. it is recognized as income.
Interest on investments received from UTI is- a)Capital receipt
- b)Revenue receipt
- c)Capital expenditures
- d)Revenue expenditures
Correct answer is option 'B'. Can you explain this answer?
Interest on investments received from UTI is
a)
Capital receipt
b)
Revenue receipt
c)
Capital expenditures
d)
Revenue expenditures
|
|
Jayant Mishra answered |
Revenue Receipt and accounted as Income in the books of Accounts. Also ,from taxation point of view, it is taxed at Normal Rate of Taxation not as a Capital Gains- ALWAYS- irrespective of the Number of Years for which the investment was made.
Chapter doubts & questions for Unit 4: Capital And Revenue Expenditures and Receipts - Accounting for CA Foundation 2025 is part of CA Foundation exam preparation. The chapters have been prepared according to the CA Foundation exam syllabus. The Chapter doubts & questions, notes, tests & MCQs are made for CA Foundation 2025 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests here.
Chapter doubts & questions of Unit 4: Capital And Revenue Expenditures and Receipts - Accounting for CA Foundation in English & Hindi are available as part of CA Foundation exam.
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