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    Question

    Which of the following is a capital

    expenditure?
    A Inauguration cost of new plant Correct Answer Incorrect Answer
    B Overhauling cost of second hand machinery Correct Answer Incorrect Answer
    C Cost for improving material efficiency Correct Answer Incorrect Answer
    D Replacement cost of spare parts Correct Answer Incorrect Answer
    E Expenses to reduce working cost Correct Answer Incorrect Answer

    Solution

    A capital expenditure is an amount spent to acquire or significantly improve the capacity or capabilities of a long-term asset such as equipment or buildings. The overhauling cost incurred on a second hand asset is incurred to bring the asset into working order which will have a useful life in long term and is therefore is treated as capital expenditure. Concept discussed in classes many times

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