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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

Acapital expenditureis 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 ascapital expenditure. Concept discussed in classes many times

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