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Standard XII
Accountancy
Honorarium
Repairs of Ma...
Question

Repairs of Machine after the machine is put to use is _________________.

A
Capital Expenditure
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B
Revenue Expenditure
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C
Deferred Revenue Expenditure
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D
Prepaid Expenses
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Solution

The correct option is B Revenue Expenditure
A revenue expenditure is an amount that is expensed immediately—thereby being matched with revenues of the current accounting period. Routine repairs are revenue expenditure because they are charged directly to an account such as Repairs and Maintenance Expense.

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Q. State with reasons whether the following are Capital or Revenue Expenses:
(i) Excise duty paid on purchase of new machine.
(ii) Wages paid to install a machine.
(iii) Repairs carried out on existing car.
(iv) Office block of building repainted for ₹ 50,000.
(v) Paid telephone bill ₹ 2,500.
Q. State whether the following expenses are capital or revenue in nature:
(i) Expenses on whitewashing and painting of a building purchased to make it ready for use.
(ii) ₹ 10,000 spent on constructing platform for a new machine.
(iii) Repair expenses of ₹ 25,000 incurred for whitewashing of factory building.
(iv) Insurance premium paid as renewal premium.
(v) Purchased a new car.
Q. State with reasons whether the following are capital or revenue expenditures:
(i) A new machine is purchased for ₹ 60,000, ₹ 800 were spent on its carriage and ₹ 1,500 were paid as wages for its installation.
(ii) A sum of ₹ 10,000 was spent on painting the new factory.
(iii) ₹ 5,000 paid for the erection of a new machine.
(iv) ₹ 2,000 were spent on repairs before using a second hand generator purchased recently.
(v) ₹ 1,500 were spent on the repair of a machinery.
(vi) ₹ 10,000 was paid as brokerage on issue of shares and other expenses of issue were ₹ 25,000.
Q.

To record a repair or maintenance expense of a machine in your records, the ___ account is ___ by the amount of the expense in a journal entry.


Q. Match List-I(Item of expenditure/receipt) with List-II(Nature of expenditure/receipt) and select the correct answer using the codes given the lists.
List-IList-II
I. Carriage charges a new machine purchased for factory(a) Revenue receipt
II. Legal expenses incurred in defending a case of violation of a provision of Factories Act(b) Revenue expenditure
III. Grant-in-aid received from the Government for the construction of a building(c) Deferred revenue expenditure
IV. Amount received for a part of the office building sublet(d) Capital expenditure
(e) Capital receipt

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