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. It is non-recurring in nature. Classify the following items into revenue expenditure and capital expenditure. Fire insurance premium on a new building. Tags: Question 9 . answer choices . 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. You may click the link to find Multiple choice questions (Q.No-1 to 10) on Capital and Revenue Receipts and Payments.. Which one of the following is NOT true about revenue expenditure? a) Purchase of new car for business manager. Capital expenditure should not be confused with operating expenses (OpEx). It is incurred for normal running of government departments and maintenance. Capital expenditure decisions are just the opposite of operating expenditure decisions. Which of the following should not be called ‘Sales’? 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. Revenue Expenditure is that part of government expenditure that does not result in the creation of assets. B. Answer: Option B It`s important for the company to know how to use the cash flow. 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. 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 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: Net Capital Expenditure made by Company = 450 – 100. Moreover, any expenditure which is incurred for the purpose of increasing profit earning capacity or reducing cost of production is a capital expenditure. Cost of dismantling a building in case a … C. The costs of running the business on a day-to-day basis. Capital expenditure is a fancy way of describing the money spent to maintain one’s real estate business. The capital expenditure decisions have the following features: i. Using a capital expenditure for an asset allows a company to deduct a portion of the expense over multiple years while the asset depreciates. Remember Multiple choice questions are having good weightage in the total marks of … Capital expenditure includes costs incurred on the acquisition of a fixed asset and any subsequent expenditure that increases the earning capacity of an existing fixed asset. Still, do not forget that it`s an industry-specific ratio. 4. The addition of a building wing. Question (a) The value of Gross Domestic Expenditure is: A. [3-4 Marks] (a) Free supply of stationary to the students by the government. Capital Receipts. 2. However, once capital assets start being put in service, depreciation begins, and they decrease in value throughout their useful lives. Example #2. 2. Solution for Which one of the following is NOT true of capital expenditure? B. 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.” D. They do not appear in the balance sheet. 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.. Question 4. It results in creation of assets. They improve the financial position of the business. The IRS does not consider as a capital expenditure any improvement that is no longer part of the home. 15 900 B. Which of the following is NOT capital expenditure? Consumption expenditure 10 500 Government expenditure 3 000 Depreciation 500 Exports 1 200 Imports 1 000 Gross capital formation (investment) 2 200. Give reason for your answer. 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. 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. Financial Accounting Multiple Choice Questions and Answers for competitive exams. Capital expenditure does not reduce the profit of the concern. (c) Expenditure on the construction of computer lab in school by the government. Goods sold on credit. Sales tax paid in connection with the purchase of office equipment is a non-recurring expenditure whose These are the running expenses of the business. Architect's fees for a new building. This type of expenditure is made in order to expand the productive or competitive posture of a business. A capital expenditure is the use of funds or assumption of a liability in order to obtain or upgrade physical assets. Expenses paid on installation of a plant. It is incurred for acquisition of capital assets. (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. Determination. B. It will increase the capital of the business It will decrease the capital of the… 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. a. 2. Which of the following is not a capital expenditure? 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. The intent is for these assets to be used for productive purposes for at least one year. A. In the long run certainity is a question Mark. Air ticket paid for the purchase of machinery. Money spent on selling fixed assets. 1. 15 200 C. 15 400 D. 18 400 E. 15 700. e. The cost of installing a piece of equipment. Which of the following is not a capital expenditure: a. Question (b) Question 16 c. capitalized if it maintains the machine in normal operating condition. 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. Stop wondering, read and find out how to get a quick soft loan in Nigeria. 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. c. A tune-up of a company vehicle. Net Capital Expenditure made by Company =350. 2. b. Solution for Which of the following expenditure is not capital expenditure for equipment? They involve large amounts of funds. Testing for use c. Uninsured theft d. Sale tax e. None… 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 … CapEx is an upfront cost, which has a value that reduces over time. 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. Capital Expenditure is: A. Which of the following expenses should not be treated as capital expenditure? Expenditure incurred in the construction of parking space for staff. Money spent on buying fixed assets or adding value to them. It does not result in creation of assets. b. expensed immediately if it merely improves the quality but does not extend the useful life. b) Paid for the certificate of entitlement of the new car. Capital expenditures have an initial increase in the asset accounts of an organization. These short solved questions or quizzes are provided by Gkseries. 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. A complete overhaul of an air-conditioning system. d. Replacement of an old motor with a new one in a piece of equipment. (b) Economic assistance given according to Ladli scheme. Challenges with Capital Expenditures. A. Capital expenditures do not cover daily operation costs of a business. Assets and expenditures that are not considered capital expenditures include inventory, personnel and training. 3. A. B. These short objective type questions with answers are very important for Board exams as well as competitive exams. It is recurring in nature and incurred regularly. 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. Call Hours: 9am - 5pm (Mon - Fri) +234-9062547747 info@myschool.ng Revenue Expenditure Capital Expenditure Capital expenditure projects are of long term in nature. Assembly b. The cash flow and capital expenditure constantly go through the business cycles of a company life. Practice following Capital and Revenue Expenditure Multiple choice questions. Operating expenses are shorter-term expenses required to meet the ongoing operational costs of running a business. C. They reduce the profit of the concern. Revenue Expenditure: Capital Expenditure: 1. Capitalized Expenditure or Capitalized Expense. 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