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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-IList-II
I. Premium paid for a lease hold property(a) Revenue expenditure
II. Insurance premium paid for risks against accidental losses of properties(fixed assets)(b) Capital receipt
III. Amount realised from the sale of securities(investment)\ purchased earlier(c) Deferred revenue expenditure
IV. Huge sales promotion expenses(d) Capital expenditure

A
I-(d), II-(b), III-(a), IV-(c)
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B
I-(c), II-(b), III-(a), IV-(d)
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C
I-(d), II-(a), III-(b), IV-(c)
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D
I-(c), II-(a), III-(b), IV-(d)
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Solution

The correct option is D I-(d), II-(a), III-(b), IV-(c)

Capital expenditure - Money spent by a business or organization on acquiring or maintaining fixed assets, such as land, building, plant & machinery etc. is termed as capital expenditure.

Revenue expenditure - A revenue expenditure is a cost that is expensed in the accounting year in which it is incurred.

Deferred revenue expenditure - It is an expenditure which is revenue in nature and incurred during an accounting period, but its benefits are to be derived from a number of following accounting periods. These expenses are unsually large in amount and, essentially, the benefits are consumed within the same accounting period.

Capital receipt - Capital receipt 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.

Therefore, in the given question ---

1. Premium paid for a lease hold property is treated as capital expenditure.

2. Insurance premium paid for risks against accidental losses of properties(fixed assets) is treated as revenue expenditure.

3. Amount realised from the sale of securities(investment)\ purchased earlier is treated as capital receipt.

4. Huge sales promotion expenses is treated deferred revenue expenditure.


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