2
Question
Match List-I(Items of expenditure and receipt) with List-II(Nature of expenditure and receipt) and select the correct answer using the codes given the lists.
List-I List-II I. Compensation paid to retrenched workers of the factory for the loss of service (a) Capital expenditure II. Legal expenses incurred in connection with the purchase of a plot of land (b) Capital receipt III. Compensation received from the government for the compulsory removal of a business premises to another place (c) Revenue expenditure IV. Sale proceeds of merchandise(goods) (d) Revenue receipt
Match List-I(Items of expenditure and receipt) with List-II(Nature of expenditure and receipt) and select the correct answer using the codes given the lists.
| List-I | List-II |
| I. Compensation paid to retrenched workers of the factory for the loss of service | (a) Capital expenditure |
| II. Legal expenses incurred in connection with the purchase of a plot of land | (b) Capital receipt |
| III. Compensation received from the government for the compulsory removal of a business premises to another place | (c) Revenue expenditure |
| IV. Sale proceeds of merchandise(goods) | (d) Revenue receipt |
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Solution
The correct option is D I-(c), II-(a), III-(b), IV-(d)
Capital expenditure - Capital expenditure, or CapEx, are funds used by a company to acquire, upgrade, and maintain physical assets such as property, industrial buildings, or equipment.This type of financial outlay is also made by companies to maintain or increase the scope of their operations.Revenue expenditure - A revenue expenditure is an amount that is expended immediately—thereby being matched with revenues of the current accounting period. Routine repairs are revenue expenditures because they are charged directly to an account such as Repairs and Maintenance Expense.
Capital receipts - Capital receipts are a non-recurring incoming cash flow into your business, which leads to the creation of a liability (a debt to be paid in the future) and a decrease in company assets (resources that lead to capital gain)
Revenue receipts - Revenue receipts are funds received by a business as a result of its core business activities.
From the above definition it is concluded that -1. Compensation paid to retrenched workers of the factory for the loss of service is revenue expenditure.
2. Legal expenses incurred in connection with the purchase of a plot of land is capital expenditure.3. Compensation received from the government for the compulsory removal of a business premises to another place is capital receipt.4. Sale proceeds of merchandise(goods) is revenue receipt.
Capital expenditure - Capital expenditure, or CapEx, are funds used by a company to acquire, upgrade, and maintain physical assets such as property, industrial buildings, or equipment.This type of financial outlay is also made by companies to maintain or increase the scope of their operations.
Revenue expenditure - A revenue expenditure is an amount that is expended immediately—thereby being matched with revenues of the current accounting period. Routine repairs are revenue expenditures because they are charged directly to an account such as Repairs and Maintenance Expense.
Capital receipts - Capital receipts are a non-recurring incoming cash flow into your business, which leads to the creation of a liability (a debt to be paid in the future) and a decrease in company assets (resources that lead to capital gain)
Revenue receipts - Revenue receipts are funds received by a business as a result of its core business activities.
From the above definition it is concluded that -
1. Compensation paid to retrenched workers of the factory for the loss of service is revenue expenditure.
2. Legal expenses incurred in connection with the purchase of a plot of land is capital expenditure.
3. Compensation received from the government for the compulsory removal of a business premises to another place is capital receipt.
4. Sale proceeds of merchandise(goods) is revenue receipt.
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