CHAPTER 14

CAPITAL AND REVENUE

ANS.5

a. Revenue Expenditure:
Amount spent for the repair of old furniture is a revenue expenditure because value of
furniture does not increase and this expenditure is incurred to keep the furniture in proper
working condition.

b. Capital Expenditure:
Billiard table is a fixed asset and will last for so many years. Amount paid as carriage on
billiard table is also a capital expenditure because it is an additional cost to the table.

c. Capital Expenditure:

Machinery is a fixed asset and all expenses connected with it are regarded its additional cost.

d. Capital Expenditure:
purchase of old machine is a capital expenditure and cost incurred to bring it into working
condition is also a capital expenditure.

e. Capital Expenditure:

Building is a fixed asset and all legal expenses connected with it are also capital expenditure.

ANS.6

i. Deferred Revenue Expenditure:

This expenditure is basically a revenue expenditure but the benefit of this expenditure
will be enjoyed by the business over a number of years. Hence -it will be regarded as a
"Deffered Revenue Expenditure.

ii. Revenue Expenditure:

Amount spent for the purchase of medicine and for carrying them to the hospital is a
revenue expenditure because medicines are to be used in the hospital within a short span
of time.

iii. Revenue Expenditure:

This is a revenue expenditure because this material is to be used within a short period of
time and it is not purchased for more than one year.
 iv. Capital Expenditure:
Construction of boundary walls is part of the college building it is a capital expenditure.

v. Capital Expenditure:
Machine is a fixed asset and all expense freight and errection charges are regarded as
additional cost of machine and so capital expenditure.
vi. This is a capital expenditure because it will increase the efficiency of the business,

ANS.7

a. Capital Expenditure:
Library of the college is a fixed asset and any addition its building or books will also be
the part of it, so it is a capital expenditure

b. Revenue Expenditure:
Common room for the students is a fixed asset and cost incurred for its regular
maintenance is a revenue expenditure.

c. Revenue Expenditure:
This is a revenue expenditure because this is necessary to keep the building in good working
condition.
d. Capital Expenditure:
Electric fittings and air conditioners are fixed assets having long life and will benefit the college
for a number of years, so money spent on these is a capital expenditure.