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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?
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Amount of Rs.5,000 spent as lawyers fee to defend a suit claiming that...
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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Amount of Rs.5,000 spent as lawyers fee to defend a suit claiming that...
Explanation:
The distinction between capital and revenue expenditure is important in determining the nature of the expenditure incurred by a business. In this case, the 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 considered as a revenue expenditure.
Revenue expenditure:
- Revenue expenditure is incurred for the purpose of generating revenue for the business in the current accounting period.
- It is a day-to-day expenses incurred by a business in carrying out its operations.
- Revenue expenditure is charged to the Profit and Loss account and is considered as an expense.
- The benefit of revenue expenditure is consumed within the current accounting period.
In this case, the amount spent on lawyers fee is a revenue expenditure because it is incurred to defend a lawsuit claiming that the factory site belonged to the plaintiff land. This expense is incurred to protect the current operations of the business and is not related to the acquisition of a new asset or the improvement of an existing asset. Therefore, it is considered as a revenue expenditure and is charged to the Profit and Loss account.
Conclusion:
Hence, the correct answer is option 'B' - Revenue expenditure.
The distinction between capital and revenue expenditure is important in determining the nature of the expenditure incurred by a business. In this case, the 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 considered as a revenue expenditure.
Revenue expenditure:
- Revenue expenditure is incurred for the purpose of generating revenue for the business in the current accounting period.
- It is a day-to-day expenses incurred by a business in carrying out its operations.
- Revenue expenditure is charged to the Profit and Loss account and is considered as an expense.
- The benefit of revenue expenditure is consumed within the current accounting period.
In this case, the amount spent on lawyers fee is a revenue expenditure because it is incurred to defend a lawsuit claiming that the factory site belonged to the plaintiff land. This expense is incurred to protect the current operations of the business and is not related to the acquisition of a new asset or the improvement of an existing asset. Therefore, it is considered as a revenue expenditure and is charged to the Profit and Loss account.
Conclusion:
Hence, the correct answer is option 'B' - Revenue expenditure.
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Amount of Rs.5,000 spent as lawyers fee to defend a suit claiming that...
Beacause its to maintain and not to increase the effeciency or to buy a new asset...maintaince is not capital,its revenue in nature
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Amount of Rs.5,000 spent as lawyers fee to defend a suit claiming that the firm factory site belonged to the plaintiff land isa)Capital expenditureb)Revenue expenditurec)Deferred revenue expenditured)None of the aboveCorrect answer is option 'B'. Can you explain this answer?
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