CA Foundation Exam > CA Foundation Questions > Which of the following statement is false?a)E...
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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?
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Most Upvoted Answer
Which of the following statement is false?a)Expenses in connection wit...
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.
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Community Answer
Which of the following statement is false?a)Expenses in connection wit...
It is a capital expenditure incurred on the fixed asset (engine) and it will increase the profit earning capacity of the business
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Which of the following statement is false?a)Expenses in connection with obtaining a licence for running the Cinema is Capital expenditureb)Heavy advertisement expenses to introduce a new product is deferred revenue expenditurec)Cost of construction of building including cost of temporary huts for storing building materials is capital expenditured)The cost of Rings and Pistons of an engine changed to increase its fuel efficiency is revenue expenditureCorrect answer is option 'D'. Can you explain this answer?
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Which of the following statement is false?a)Expenses in connection with obtaining a licence for running the Cinema is Capital expenditureb)Heavy advertisement expenses to introduce a new product is deferred revenue expenditurec)Cost of construction of building including cost of temporary huts for storing building materials is capital expenditured)The cost of Rings and Pistons of an engine changed to increase its fuel efficiency is revenue expenditureCorrect answer is option 'D'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about Which of the following statement is false?a)Expenses in connection with obtaining a licence for running the Cinema is Capital expenditureb)Heavy advertisement expenses to introduce a new product is deferred revenue expenditurec)Cost of construction of building including cost of temporary huts for storing building materials is capital expenditured)The cost of Rings and Pistons of an engine changed to increase its fuel efficiency is revenue expenditureCorrect answer is option 'D'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Which of the following statement is false?a)Expenses in connection with obtaining a licence for running the Cinema is Capital expenditureb)Heavy advertisement expenses to introduce a new product is deferred revenue expenditurec)Cost of construction of building including cost of temporary huts for storing building materials is capital expenditured)The cost of Rings and Pistons of an engine changed to increase its fuel efficiency is revenue expenditureCorrect 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 expenditureb)Heavy advertisement expenses to introduce a new product is deferred revenue expenditurec)Cost of construction of building including cost of temporary huts for storing building materials is capital expenditured)The cost of Rings and Pistons of an engine changed to increase its fuel efficiency is revenue expenditureCorrect answer is option 'D'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about Which of the following statement is false?a)Expenses in connection with obtaining a licence for running the Cinema is Capital expenditureb)Heavy advertisement expenses to introduce a new product is deferred revenue expenditurec)Cost of construction of building including cost of temporary huts for storing building materials is capital expenditured)The cost of Rings and Pistons of an engine changed to increase its fuel efficiency is revenue expenditureCorrect answer is option 'D'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Which of the following statement is false?a)Expenses in connection with obtaining a licence for running the Cinema is Capital expenditureb)Heavy advertisement expenses to introduce a new product is deferred revenue expenditurec)Cost of construction of building including cost of temporary huts for storing building materials is capital expenditured)The cost of Rings and Pistons of an engine changed to increase its fuel efficiency is revenue expenditureCorrect answer is option 'D'. Can you explain this answer?.
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