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Rs. 2,500 spent on the overhaul of machines purchased second-hand is
- a)Capital expenditure
- b)Revenue expenditure
- c)Deferred revenue expenditure
- d)None of the above
Correct answer is option 'A'. Can you explain this answer?
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Rs. 2,500 spent on the overhaul of machines purchased second-hand isa)...
Answer: (A) Capital expenditure
Description: Rs. 2,500 spent on the overhauling on purchase of second hand machinery to put it in working condition and to derive endurable long- term advantage is a capital expenditure.
Most Upvoted Answer
Rs. 2,500 spent on the overhaul of machines purchased second-hand isa)...
It is beacause overhaul means major repair which increase efficiency of machine which benefit can derived for multiple year
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Rs. 2,500 spent on the overhaul of machines purchased second-hand isa)...
Answer:
The correct answer is option 'A' - Capital expenditure.
Explanation:
In the given scenario, Rs. 2,500 was spent on the overhaul of machines purchased second-hand. Let's analyze the nature of this expenditure:
1. Nature of expenditure:
The expenditure was incurred on the overhaul of machines. Overhauling involves repairing, replacing, or improving the various components of the machines to restore their working condition or enhance their efficiency. This expenditure is aimed at improving the long-term asset (machines) and increasing their productive capacity. Therefore, it falls under the category of capital expenditure.
2. Long-term asset:
The machines that were purchased second-hand are considered as long-term assets of the business. The overhaul expenditure incurred on these machines is aimed at improving their performance and extending their useful life. As a result, the expenditure is directly related to the long-term asset and qualifies as a capital expenditure.
Therefore, based on the nature of the expenditure and its relationship to the long-term asset, the correct classification for the Rs. 2,500 spent on the overhaul of machines purchased second-hand is capital expenditure (option 'A').
The correct answer is option 'A' - Capital expenditure.
Explanation:
- Capital expenditure: It refers to the expenditure incurred on acquiring or improving a long-term asset, such as machinery, buildings, or land. Capital expenditures are typically made to increase the productive capacity or efficiency of the business.
- Revenue expenditure: It refers to the expenditure incurred on the day-to-day operations of the business, which is necessary to maintain and run the business. Revenue expenditures are typically incurred for short-term benefit and do not result in the acquisition or improvement of long-term assets.
- Deferred revenue expenditure: It refers to the expenditure that is incurred in one accounting period but is expected to provide benefits over multiple accounting periods. These expenditures are typically capitalized and amortized over their useful life.
In the given scenario, Rs. 2,500 was spent on the overhaul of machines purchased second-hand. Let's analyze the nature of this expenditure:
1. Nature of expenditure:
The expenditure was incurred on the overhaul of machines. Overhauling involves repairing, replacing, or improving the various components of the machines to restore their working condition or enhance their efficiency. This expenditure is aimed at improving the long-term asset (machines) and increasing their productive capacity. Therefore, it falls under the category of capital expenditure.
2. Long-term asset:
The machines that were purchased second-hand are considered as long-term assets of the business. The overhaul expenditure incurred on these machines is aimed at improving their performance and extending their useful life. As a result, the expenditure is directly related to the long-term asset and qualifies as a capital expenditure.
Therefore, based on the nature of the expenditure and its relationship to the long-term asset, the correct classification for the Rs. 2,500 spent on the overhaul of machines purchased second-hand is capital expenditure (option 'A').
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Rs. 2,500 spent on the overhaul of machines purchased second-hand isa)Capital expenditureb)Revenue expenditurec)Deferred revenue expenditured)None of the aboveCorrect answer is option 'A'. Can you explain this answer?
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