CAPITAL EXPENDITURE VS REVENUE EXPENDITURE

1. True or False: An expenditure that extends the useful life of an existing asset is generally a Revenue Expenditure.

• True

• False

Answer explanation

Correct! Expenditures that extend an asset's useful life are typically Capital Expenditures because they provide long-term benefits beyond the current period.

2. Is the cost of replacing a broken window in the office building a Revenue Expenditure or a Capital Expenditure?

• Revenue Expenditure

• Capital Expenditure

Answer explanation

Correct! Replacing a broken window is generally considered routine maintenance to keep the building in its existing condition, not to significantly improve or extend its life.

3. True or False: Capital expenditures are recorded directly as expenses on the Statement of Profit or Loss when they occur.

• True

• False

Answer explanation

Correct! Capital expenditures are capitalized (recorded as assets) on the Statement of Financial Position and then expensed over time through depreciation, not immediately in the year they occur.

4. Is the cost of purchasing printer paper and ink for daily office use a Revenue Expenditure or a Capital Expenditure?

• Revenue Expenditure

• Capital Expenditure

Answer explanation

Correct! These are consumables used up within the current period as part of normal operations, making them revenue expenditures.

5. True or False: Revenue expenditures are typically recurring in nature.

• True

• False

Answer explanation

Correct! Many revenue expenditures, such as rent, utilities, and routine maintenance, are incurred regularly as part of ongoing business operations.

6. A company performs a major upgrade to its production machinery that significantly increases its output capacity. Is this a Revenue Expenditure or a Capital Expenditure?

• Capital Expenditure

• Revenue Expenditure

Answer explanation

Correct! Enhancing the productive capacity of an asset by a significant upgrade makes it a capital expenditure, as it provides future economic benefits.

7. Is the cost of routine maintenance for office equipment classified as a Revenue Expenditure or a Capital Expenditure?

• Capital Expenditure

• Revenue Expenditure

8. A business purchases a new delivery truck to expand its logistics capabilities. Is this considered a Revenue Expenditure or a Capital Expenditure?

• Revenue Expenditure

• Capital Expenditure

9. True or False: Revenue expenditures are usually associated with the acquisition of long-term assets.

• True

• False

10. True or False: Capital expenditures are typically one-time costs that provide long-term benefits.

• True

• False