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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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