Question

An expenditure is treated as capital nature, when it ________________.

• A. receiver of the amount is going to use it for the purchase of fixed assets
• B. increases the quantity of fixed assets
• C. is paid for meeting the normal expenses of the business
• D. decreases the quantity of other assets

Answer 1

The correct option is B increases the quantity of fixed assets

Expenditure incurred for normal day to day business activity are revenue expenditure. An expense incurred to enhance the capacity and gives the benefits to the business for longer duration is a capital expenditure. This will increase the value of fixed assets.