Michael took 1,000 rupees from the revenues of his business and lent it to a friend to kickstart his business. This transaction falls under account.

Capital Receipt

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Capital Expenditure

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Revenue Receipt

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Revenue Expenditure

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Solution

The correct option is B Capital Expenditure
Since lending leads to a cash outflow from the business, this is an expenditure. Also, Michael is expected be repaid by the borrower. That is, there is an account receivable added to his balance sheet, increasing the value of assets. As this transaction leads to a change in the balance sheet, this comes under the capital budget. Therefore, this is a capital expenditure.

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