Solution for Which of the following expenditure is not capital expenditure for equipment? Capital Expenditure is: A. Capital expenditures refer to funds that are used by a company for the purchase, improvement, or maintenance of long-term assets to improve the efficiency or capacity of the company. In the long run certainity is a question Mark. answer choices . The addition of a building wing. It is incurred for normal running of government departments and maintenance. Financial Accounting Multiple Choice Questions and Answers for competitive exams. Capital Expenditure (CapEx): CapEx refers to the spending of money on physical infrastructure up front, and then deducting that expense from your tax bill over time. Net Capital Expenditure made by Company = 450 – 100. This type of expenditure is made in order to expand the productive or competitive posture of a business. These short solved questions or quizzes are provided by Gkseries. Revenue Expenditure Capital Expenditure It does not result in creation of assets. Capital expenditure is recorded as a Non-Current Asset; revenue expenditure is recorded as an expense or current asset 6 Identify if the following is capital or revenue expenditure and state why. However, once capital assets start being put in service, depreciation begins, and they decrease in value throughout their useful lives. The intent is for these assets to be used for productive purposes for at least one year. [3-4 Marks] (a) Free supply of stationary to the students by the government. A revenue expenditure is an expenditure whose benefit expires within the current accounting period and is in the nature of recurring and is therefore written off to P&L A/c. The others are of its characteristic ush as the benefit arise over a number of yrs, is likely to involve considerable expenditure, it is an impartant part of a company's strategic planning. Air ticket paid for the purchase of machinery. It is recurring in nature and incurred regularly. These are the running expenses of the business. A. Which of the following expenses should not be treated as capital expenditure? Capital expenditures do not cover daily operation costs of a business. Goods sold on credit. Multiple Choice Advertising expenditures to introduce a new product line Sales tax paid in conjunction with the purchase of new machinery Installation of elevators to replace escalators An amount paid to acquire a patent with a … Which of the following is not a capital expenditure? Which of the following is NOT capital expenditure? 3. Capital expenditure is a fancy way of describing the money spent to maintain one’s real estate business. Testing for use c. Uninsured theft d. Sale tax e. None… Call Hours: 9am - 5pm (Mon - Fri) +234-9062547747 info@myschool.ng Capital expenditures have an initial increase in the asset accounts of an organization. Capital expenditure should not be confused with operating expenses (OpEx). Revenue Expenditure: Capital Expenditure: 1. Net Capital Expenditure made by Company =350. Question (b) Question 16 Capital Receipts. (iii) Purchase of refrigerator by a firm for own use will be included in the national income as it is regarded as final consumption expenditure. 2. B. Example #2. Capital expenditure is the investment in assets that a firm makes in order to buy, maintain or update the assets related to the operations. Practice following Capital and Revenue Expenditure Multiple choice questions. Consumption expenditure 10 500 Government expenditure 3 000 Depreciation 500 Exports 1 200 Imports 1 000 Gross capital formation (investment) 2 200. A capital expenditure is the use of funds or assumption of a liability in order to obtain or upgrade physical assets. It is incurred for acquisition of capital assets. Capital expenditure Key words indicating Revenue expenditure Enhance Upgrade Extend Improve Construct Purchase Repair Maintain Replace Like-for-like Remedial Renew The following page gives some examples of the most common expenditure on existing assets and whether it should be treated as capital or revenue. c. A tune-up of a company vehicle. Stop wondering, read and find out how to get a quick soft loan in Nigeria. Cost of dismantling a building in case a … These are funds generated from non-operating activities of a business hence are not shown inside the income statement instead they are shown inside a balance sheet.. Tags: Question 9 . Give reason for your answer. (c) Expenditure on the construction of computer lab in school by the government. Assets and expenditures that are not considered capital expenditures include inventory, personnel and training. C. They reduce the profit of the concern. Classify the following items into revenue expenditure and capital expenditure. Capital expenditure does not reduce the profit of the concern. Remember Multiple choice questions are having good weightage in the total marks of … Which one of the following is NOT true about revenue expenditure? The IRS does not consider as a capital expenditure any improvement that is no longer part of the home. Money spent on buying fixed assets or adding value to them. It will increase the capital of the business It will decrease the capital of the… Operating expenses are shorter-term expenses required to meet the ongoing operational costs of running a business. A capital expenditure (CAPEX) is the money companies use to purchase, upgrade, or extend the life of an asset. Revenue Expenditure is that part of government expenditure that does not result in the creation of assets. b. It`s important for the company to know how to use the cash flow. C. The costs of running the business on a day-to-day basis. A. Using a capital expenditure for an asset allows a company to deduct a portion of the expense over multiple years while the asset depreciates. Capital expenditure or capital expense (capex or CAPEX) is the money an organization or corporate entity spends to buy, maintain, or improve its fixed assets, such as buildings, vehicles, equipment, or land. Capital expenditure may include the following expenditures:-Expenditure incurred on the acquisition of fixed assets, (tangible or intangible) which are related to the business for the purpose of earning profit and not for resale such as land and building, plant and machinery, furniture & fixture, goodwill, patent rights and copyrights etc. Challenges with Capital Expenditures. CapEx is an upfront cost, which has a value that reduces over time. Or, as Investopedia so eloquently put it, capital expenditures represent the “funds used by a company to acquire, upgrade, and maintain physical assets such as property, industrial buildings, or equipment.” Question (a) The value of Gross Domestic Expenditure is: A. The cash flow and capital expenditure constantly go through the business cycles of a company life. Moreover, any expenditure which is incurred for the purpose of increasing profit earning capacity or reducing cost of production is a capital expenditure. Sales tax paid in connection with the purchase of office equipment is a non-recurring expenditure whose Determination. b) Paid for the certificate of entitlement of the new car. In the financial statement of Larsen and Toubro Limited, for the year ended March 31, 2018, the cash flow statement has following line items in cash generated from investing activities: Capital receipts are funds received by a business which are not revenue in nature & lead to an overall increase in the total capital of a company. A complete overhaul of an air-conditioning system. Assembly b. Money spent on selling fixed assets. Hence Payment of corporate tax is not included in the national income as it is a mere transfer payment from the firm to the government. Answer: Option B They involve large amounts of funds. d. Replacement of an old motor with a new one in a piece of equipment. You may click the link to find Multiple choice questions (Q.No-1 to 10) on Capital and Revenue Receipts and Payments.. Expenses paid on installation of a plant. Architect's fees for a new building. Solution for Which one of the following is NOT true of capital expenditure? Question 4. (b) Economic assistance given according to Ladli scheme. B. They improve the financial position of the business. 2. 15 900 B. An expenditure made in connection with a machine being used by an enterprise should be a. expensed immediately if it merely extends the useful life but does not improve the quality. 2. B. e. The cost of installing a piece of equipment. a) Purchase of new car for business manager. 15 200 C. 15 400 D. 18 400 E. 15 700. 2. It is non-recurring in nature. Sometimes the expenditure even not resulting in the increase of profit earning capacity but acquires an asset comparatively permanent in nature will also be a capital expenditure. c. capitalized if it maintains the machine in normal operating condition. Capitalized Expenditure or Capitalized Expense. Capital expenditure projects are of long term in nature. These short objective type questions with answers are very important for Board exams as well as competitive exams. Fire insurance premium on a new building. It is the planning, evaluation and selection of capital expenditure proposals, the benefits of which are expected to accrue over more than one accounting year. b. expensed immediately if it merely improves the quality but does not extend the useful life. 1. 4. D. They do not appear in the balance sheet. a. A. Expenditure incurred in the construction of parking space for staff. It is considered a capital expenditure when the asset is newly purchased or when money is used towards extending the useful life of an existing asset, such as repairing the roof. Capitalized expenditure is nothing but a revenue expenditure which is essential to acquire and function a new asset or improve an existing asset’s earning capacity.All such expenses are treated as if it were for the purchase of the fixed asset itself and are termed as a capitalized expenditure. It results in creation of assets. Still, do not forget that it`s an industry-specific ratio. 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