CA Foundation Exam > CA Foundation Notes > Accounting for CA Foundation > Unit 4: Summary - Capital And Revenue Expenditures and Receipts
Unit 4: Summary - Capital And Revenue Expenditures and Receipts | Accounting for CA Foundation PDF Download
- Revenue expenditures are shown in the profit and loss account while capital expenditures are placed on the asset side of the balance sheet since they generate benefits for more than are accounting period.
- Prepaid expenses are future expenses that have been paid in advance. These are shown in the balance sheet as an asset.
- Receipts obtained should be classified between revenue receipts and capital receipts.
Ques 1: Money spent Rs 10,000 as traveling expenses of the directors on trips abroad for purchase of capital assets is
(a) Capital expenditures
(b) Revenue expenditures
(c) Prepaid revenue expenditures
Ans:(a)
Ques 2: Amount of Rs 5,000 spent as lawyers’ fee to defend a suit claiming that the firm’s factory site belonged to the plainti ’s land is
(a) Capital expenditures
(b) Revenue expenditures
(c) Prepaid revenue expenditures
Ans : (b)
Ques 3: Entrance fee of Rs 2,000 received by Ram and Shyam Social Club is
(a) Capital receipt
(b) Revenue receipt
(c) Capital expenditures
Ans: (a)
Ques 4: Subsidy of Rs 40,000 received from the government for working capital by a manufacturing concern is
(a) Capital receipt
(b) Revenue receipt
(c) Capital expenditures
Ans: (b)
Ques 5: Insurance claim received on account of machinery damaged completely by fire is
(a) Capital receipt
(b) Revenue receipt
(c) Capital expenditures
Ans: (a)
Ques 6: Interest on investments received from UTI is
(a) Capital receipt
(b) Revenue receipt
(c) Capital expenditures
Ans: (b)
Ques 7: Amount received from IDBI as a medium term loan for augmenting working capital is
(a) Capital expenditures
(b) Revenue expenditures
(c) Capital receipt
Ans: (c)
Ques 8: Revenue from sale of products, ordinarily, is reported as part of the earning in the period in which
(a) The sale is made.
(b) The cash is collected.
(c) The products are manufactured
Ans: (a)
Ques 9: If repair cost is Rs 25,000, whitewash expenses are Rs 5,000, (both these expenses relate to presently used building) cost of extension of building is Rs 2,50,000 and cost of improvement in electrical wiring system is Rs 19,000; the amount to be expensed is
(a) Rs 2,99,000.
(b) Rs 44,000.
(c) Rs 30,000.
Ans: (c)
The document Unit 4: Summary - Capital And Revenue Expenditures and Receipts | Accounting for CA Foundation is a part of the CA Foundation Course Accounting for CA Foundation.
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FAQs on Unit 4: Summary - Capital And Revenue Expenditures and Receipts - Accounting for CA Foundation
| 1. What is the difference between capital and revenue expenditures? |  |
Ans. Capital expenditures refer to the funds spent on acquiring or improving long-term assets that are expected to benefit the business for multiple accounting periods. Revenue expenditures, on the other hand, are expenses incurred in the normal course of business operations that are expected to provide benefits only in the current accounting period.
| 2. Can you provide some examples of capital expenditures? | |
Ans. Examples of capital expenditures include the purchase of land, buildings, machinery, vehicles, or other long-term assets that are essential for the business's operations. Additionally, expenditures made to expand or upgrade existing assets also fall under capital expenditures.
| 3. What are some examples of revenue expenditures? | |
Ans. Examples of revenue expenditures include routine expenses such as salaries, rent, utility bills, repairs, maintenance, and advertising costs. These expenses are necessary for the day-to-day operations of the business and are typically incurred frequently.
| 4. How are capital and revenue receipts different? | |
Ans. Capital receipts are the funds received by a business from non-operating activities, such as the sale of long-term assets, investments, or loans. These receipts do not form part of the regular business operations and are considered as capital in nature. On the other hand, revenue receipts are the funds received by a business from its primary operations, such as sales of goods or services, rent received, or interest earned.
| 5. Give an example of a capital receipt and a revenue receipt. | |
Ans. An example of a capital receipt is the sale of a building by a business. The funds received from this sale do not relate to the regular business operations and are considered capital in nature. On the other hand, an example of a revenue receipt is the cash received from customers for the sale of products or services. This cash is directly related to the business's day-to-day operations and is considered revenue in nature.
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