Charging of Capital Expenditure to Revenue results in ______________.

Secret Reserve

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Revenue Reserve

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Capital Reserve

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None of these

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Solution

The correct option is A Secret Reserve
If any organisation show capital expenditure as revenue expenditure, it will decrease the net profit of organisation. Same hidden profit will create secret reserves.
Difference between the actual value and less value of current assets will create secret reserve.

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Q. Treating a revenue expense as a capital expenditure is an example of __________.

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Q. Match List-I(Item of expenditure/receipt) with List-II(Nature of expenditure/receipt) and select the correct answer using the codes given the lists.

List-I	List-II
I. Carriage charges a new machine purchased for factory	(a) Revenue receipt
II. Legal expenses incurred in defending a case of violation of a provision of Factories Act	(b) Revenue expenditure
III. Grant-in-aid received from the Government for the construction of a building	(c) Deferred revenue expenditure
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	(e) Capital receipt

Distinguish between capital and revenue expenditure and state whether the following statements are items of capital or revenue expenditure.
(a) Expenditure incurred on repairs and whitewashing at the time of purchase of an old building in order to make it usable.
(b) Expenditure incurred to provide one more exit in a cinema hall in compliance with a government order.
(c) Registration fees paid at the time of purchase of a building.
(d) Expenditure incurred in the maintenance of a tea garden which will produce tea after four years.
(e) Depreciation charged on a plant.
(f) The expenditure incurred in erecting a platform on which a machine will be fixed.
(g) Advertising expenditure, the benefits of which will last for four years.

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Charging of Capital Expenditure to Revenue results in ______________.

The correct option is A Secret ReserveIf any organisation show capital expenditure as revenue expenditure, it will decrease the net profit of organisation. Same hidden profit will create secret reserves.Difference between the actual value and less value of current assets will create secret reserve.