Question

Money spent on rebuilding a factory
Is it capital or revenue expenditure

Answer 1

Dear Student,

Money spend on rebuilding a factory is capital expenditure. Because Capital expenditures represent major investments of capital that a company makes to maintain or, more often, to expand its business and generate additional profits.
Capital expenses are for the acquisition of long-term assets, such as facilities or manufacturing equipment. Because such assets provide income-generating value for a company for a period of years, companies are not allowed to deduct the full cost of the asset in the year the expense is incurred; they must recover the cost through year-by-year depreciation over the useful life of the asset. Companies often use debt financing or equity financing to cover the substantial costs involved in acquiring major assets for expanding their business.



Regards,