Which of the following is a capital expenditure:
A. Repairs and painting of an old building
B. Repairing and servicing of an old typewriter
C. Retreading of truck tyers
D. Repairing of staircases
E. None of the above
Answer: Option E
Solution (By Examveda Team)
Capital expenditure is incurred to acquire or improve a fixed asset, resulting in an increase in its useful life, capacity, or efficiency.On the other hand, revenue expenditure is incurred for maintaining assets in their normal working condition.
Repairs and painting of an old building are routine maintenance activities and do not enhance the life or capacity significantly, so they are revenue expenditure.
Repairing and servicing of an old typewriter is also a normal maintenance expense, hence revenue in nature.
Retreading of truck tyres only restores usability and does not increase efficiency beyond the original condition, so it is revenue expenditure.
Repairing of staircases, unless it involves major improvement, is generally treated as revenue expenditure.
Thus, none of the given options qualify as capital expenditure.
Hence, the correct answer is None of the above.
This Question Belongs to Commerce >> Accounting
The correct answer is:
None of the above (A, B, C, D) — all are revenue expenditures.
Precise reasoning:
Capital expenditure is incurred to:
acquire a new asset, or
increase the earning capacity, life, or efficiency of an existing asset.