Question

Expenditure incurred in normal course of business and whose benefit expires within the year is known as ______. While _______ is that expenditure which results in acquisition of an assets or which results in an increase in earning capacity of business.

• A. Capital expenditure, Revenue expenditure
• B. Revenue expenditure, Revenue expenditure
• C. Deferred Revenue expenditure, Revenue expenditure
• D. Revenue expenditure, capital expenditure

Answer 1

The correct option is D Revenue expenditure, capital expenditure

Revenue expenditure can be easily defined as the costs incurred for the day to day expenses of carrying on the functions of business such as rent, wages, stationary, insurance, etc. Revenue Expenditure is an expense in the Profit and Loss account. The expenses which are incurred by the organization in setting the fixed assets in proper condition by maintenance and restoration activities are termed as Revenue Expenditures.

Capital expenditure can be easily defined as money spent for purchase or creating of long-term assets such as building, furniture, machines, vehicles, etc. The expenditure made on the capital items is spread over several years. The capital items are charged depreciation for the time it is used.