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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?
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Insurance claim received on account of machinery damaged completely by...
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).
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Insurance claim received on account of machinery damaged completely by...
Capital Receipt
Definition:
A capital receipt is a one-time inflow of funds into a business that is not a part of the company's regular operations. Capital receipts are usually generated from the sale of long-term investments or fixed assets, such as property or equipment. They may also be generated from the issuance of stock or bonds.
Explanation:
When machinery is damaged completely by fire, and an insurance claim is received, it is considered a capital receipt because it is a one-time inflow of funds that is not a part of the company's regular operations. The insurance claim is not expected to be repeated in the future, and it is not generated from the sale of goods or services. Therefore, it is classified as a capital receipt.
To understand it more clearly, we can differentiate between capital and revenue expenditures. Capital expenditures are expenditures that benefit the company over a long period of time, such as the purchase of fixed assets. Revenue expenditures are expenditures that benefit the company for a short period of time, such as the purchase of inventory or the payment of salaries.
In this case, the machinery damaged completely by fire is a fixed asset, and the insurance claim received is not related to the company's regular operations. Therefore, it is classified as a capital receipt.
Conclusion:
The correct answer to this question is option 'A', which is a capital receipt.
Definition:
A capital receipt is a one-time inflow of funds into a business that is not a part of the company's regular operations. Capital receipts are usually generated from the sale of long-term investments or fixed assets, such as property or equipment. They may also be generated from the issuance of stock or bonds.
Explanation:
When machinery is damaged completely by fire, and an insurance claim is received, it is considered a capital receipt because it is a one-time inflow of funds that is not a part of the company's regular operations. The insurance claim is not expected to be repeated in the future, and it is not generated from the sale of goods or services. Therefore, it is classified as a capital receipt.
To understand it more clearly, we can differentiate between capital and revenue expenditures. Capital expenditures are expenditures that benefit the company over a long period of time, such as the purchase of fixed assets. Revenue expenditures are expenditures that benefit the company for a short period of time, such as the purchase of inventory or the payment of salaries.
In this case, the machinery damaged completely by fire is a fixed asset, and the insurance claim received is not related to the company's regular operations. Therefore, it is classified as a capital receipt.
Conclusion:
The correct answer to this question is option 'A', which is a capital receipt.
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Community Answer
Insurance claim received on account of machinery damaged completely by...
Basically machinery is an fixed asset capital nature so, claims also treat as capital receipt only.
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Insurance claim received on account of machinery damaged completely by fire isa)Capital receiptb)Revenue receiptc)Capital expendituresd)Revenue expendituresCorrect answer is option 'A'. Can you explain this answer?
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Insurance claim received on account of machinery damaged completely by fire isa)Capital receiptb)Revenue receiptc)Capital expendituresd)Revenue expendituresCorrect answer is option 'A'. 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 Insurance claim received on account of machinery damaged completely by fire isa)Capital receiptb)Revenue receiptc)Capital expendituresd)Revenue expendituresCorrect answer is option 'A'. 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 Insurance claim received on account of machinery damaged completely by fire isa)Capital receiptb)Revenue receiptc)Capital expendituresd)Revenue expendituresCorrect answer is option 'A'. Can you explain this answer?.
Insurance claim received on account of machinery damaged completely by fire isa)Capital receiptb)Revenue receiptc)Capital expendituresd)Revenue expendituresCorrect answer is option 'A'. 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 Insurance claim received on account of machinery damaged completely by fire isa)Capital receiptb)Revenue receiptc)Capital expendituresd)Revenue expendituresCorrect answer is option 'A'. 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 Insurance claim received on account of machinery damaged completely by fire isa)Capital receiptb)Revenue receiptc)Capital expendituresd)Revenue expendituresCorrect answer is option 'A'. Can you explain this answer?.
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