Compensation paid to employee who met accident during working in factory:

Definition of Compensation:
Compensation is a payment made by an employer to an employee for the services rendered by them during a specific period. If an employee meets with an accident during working in a factory, the employer is liable to pay compensation to the employee as per the Workmen's Compensation Act, 1923.

Nature of Compensation:
Compensation paid to an employee who met with an accident during working in a factory is a business expense and is recorded in the books of accounts. It is an expense incurred by the employer for the benefit of the business.

Types of expenditure:

(a) Capital expenditure:
Capital expenditure is the expenditure incurred on acquiring a long-term asset or improving the existing assets of the business, which provides a benefit to the business for more than one accounting period. Compensation paid to an employee who met with an accident during working in a factory is not a capital expenditure because it does not provide any long-term benefit to the business.

(b) Revenue expenditure:
Revenue expenditure is the expenditure incurred on the day-to-day running of the business, which is necessary for the smooth functioning of the business. Compensation paid to an employee who met with an accident during working in a factory is a revenue expenditure because it is incurred to maintain the safety of the employees and to ensure the smooth functioning of the business.

(c) Deferred revenue expenditure:
Deferred revenue expenditure is the expenditure incurred in the current accounting period, but the benefit of which will be received in the future accounting period. Compensation paid to an employee who met with an accident during working in a factory is not a deferred revenue expenditure because the benefit of which is not received in the future but is received in the current accounting period.

(d) Capital loss:
Capital loss is the loss incurred on the sale of a long-term asset. Compensation paid to an employee who met with an accident during working in a factory is not a capital loss because it is not related to the sale of a long-term asset.

Conclusion:
Compensation paid to an employee who met with an accident during working in a factory is a revenue expenditure and is recorded in the books of accounts as an expense. It is necessary for the smooth functioning of the business and to maintain the safety of the employees.

Option A capital expenditure, because it is an unexpected loss which incurred during working in factory, it's not done on recurring basis that's why it is an capital expenditure.