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

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