CA Foundation Exam > CA Foundation Questions > Rs. 1,200 spent on the repairs of machine.a)C...
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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?
Verified Answer
Rs. 1,200 spent on the repairs of machine.a)Capital expenditureb)Reven...
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.
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Rs. 1,200 spent on the repairs of machine.a)Capital expenditureb)Reven...
Explanation:
Revenue expenditure refers to the expenses incurred in the normal course of business, which are incurred to maintain the earning capacity of the business. Capital expenditure, on the other hand, is incurred to acquire or improve long-term assets, which are expected to provide benefits over an extended period.
In this case, the expenditure of Rs. 1,200 is incurred on the repairs of a machine, which is a revenue expenditure. The repairs are necessary to keep the machine in working condition, and the expense incurred is expected to provide benefits only in the current accounting period. Therefore, it is classified as a revenue expenditure.
Conclusion:
The correct answer is option 'B,' i.e., Revenue expenditure.
Revenue expenditure refers to the expenses incurred in the normal course of business, which are incurred to maintain the earning capacity of the business. Capital expenditure, on the other hand, is incurred to acquire or improve long-term assets, which are expected to provide benefits over an extended period.
In this case, the expenditure of Rs. 1,200 is incurred on the repairs of a machine, which is a revenue expenditure. The repairs are necessary to keep the machine in working condition, and the expense incurred is expected to provide benefits only in the current accounting period. Therefore, it is classified as a revenue expenditure.
Conclusion:
The correct answer is option 'B,' i.e., Revenue expenditure.
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Rs. 1,200 spent on the repairs of machine.a)Capital expenditureb)Reven...
It is a revenue expenditure
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