Capital and Revenue Expenditure

All expenditure, when incurred, is shown either as a cost of sale or an expense in the profit and loss account or as a fixed asset in the balance sheet In deciding where to show the expenditure, which of the following is not relevant ?

• The improvement value, if any, of the expenditure.

• The likelihood of being able to recover the expenditure in future accounting periods.

• The date on which the expenditure was incurred.

• None of the above.

Capital expenditure is . . .

• money brought into a firm by its proprietor.

• expenditure incurred to finance the day-to-day operations of a firm.

• expenditure incurred on the acquisition or improvement of fixed assets.

• None of the above.

Which of the following is capital expenditure ?

• The cost of repairing a vehicle.

• The cost of acquiring a vehicle for re-sale.

• Proceeds arising from the sale of a van which had been used in the business to make deliveries to customers.

• The cost of a new vehicle acquired for continuing use in the business.

In the case of a vehicle retailer, which of the following is capital expenditure ?

• The annual cost of a computer maintenance contract.

• Legal fees relating to employee accident claims.

• The cost of constructing a roof over the service station area.

• The purchase of vehicles for re-sale.

Which of the following is revenue expenditure ?

• The cost of acquiring machinery for continuing use in the business.

• The introduction of additional capital by a proprietor.

• The cost of advertising a mid-season sale.

• The transfer of surplus funds from a bank current account to a bank deposit account.

In the case of a newsagent, which of the following is a revenue receipt ?

• The proceeds of the sale of plant and equipment.

• Money received from an insurance company as a result of crashing a delivery vehicle.

• A refund received from a supplier as compensation for damaged stock supplied.

• None of the above.

If, in the case of an engineering firm, the cost of acquiring a vehicle is inadvertently debited to the motor expenses account in the nominal (general) ledger . . .

• the total of current assets will be understated.

• the total of current liabilities will be overstated.

• the total of motor expenses will be understated.

• the total of fixed assets will be understated.