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Amount spent on increasing the seating capacity in cinema hall 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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Amount spent on increasing the seating capacity in cinema hall is:-a)C...
Answer: (A) Capital expenditure
Description: Amount spent on increasing the seating capacity is a capital expenditure as this expenditure proposes to increase the capacity which is a long - term benefit for the organisation.
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Amount spent on increasing the seating capacity in cinema hall is:-a)C...
Capital Expenditure
Capital expenditure refers to the amount spent on acquiring or improving a non-current asset that will provide a long-term benefit to the business. The expenditure is incurred with the aim of increasing the earning capacity of the business, rather than for day-to-day expenses.
Explanation:
Increasing the seating capacity in a cinema hall involves significant expenditure on construction, renovation, and installation of new seats. This expenditure is incurred with the aim of increasing the earning capacity of the cinema hall in the long run, as more customers can be accommodated. Hence, it falls under the category of capital expenditure.
Benefits of capital expenditure:
- It helps to increase the earning capacity of the business in the long run.
- It improves the efficiency and productivity of the business.
- It enhances the quality of goods or services provided by the business.
- It helps to maintain the competitive position of the business in the market.
Conclusion:
In conclusion, the amount spent on increasing the seating capacity in a cinema hall is classified as capital expenditure. It is important for businesses to distinguish between capital and revenue expenditure, as it affects their financial statements and tax liabilities. Capital expenditure is a long-term investment that provides a lasting benefit to the business, while revenue expenditure is a short-term expense that is incurred for day-to-day operations.
Capital expenditure refers to the amount spent on acquiring or improving a non-current asset that will provide a long-term benefit to the business. The expenditure is incurred with the aim of increasing the earning capacity of the business, rather than for day-to-day expenses.
Explanation:
Increasing the seating capacity in a cinema hall involves significant expenditure on construction, renovation, and installation of new seats. This expenditure is incurred with the aim of increasing the earning capacity of the cinema hall in the long run, as more customers can be accommodated. Hence, it falls under the category of capital expenditure.
Benefits of capital expenditure:
- It helps to increase the earning capacity of the business in the long run.
- It improves the efficiency and productivity of the business.
- It enhances the quality of goods or services provided by the business.
- It helps to maintain the competitive position of the business in the market.
Conclusion:
In conclusion, the amount spent on increasing the seating capacity in a cinema hall is classified as capital expenditure. It is important for businesses to distinguish between capital and revenue expenditure, as it affects their financial statements and tax liabilities. Capital expenditure is a long-term investment that provides a lasting benefit to the business, while revenue expenditure is a short-term expense that is incurred for day-to-day operations.
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Amount spent on increasing the seating capacity in cinema hall is:-a)Capital Expenditureb)Revenue Expenditurec)Deferred Revenue Expenditured)None of the above.Correct answer is option 'A'. Can you explain this answer?
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