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Revenue Budget

State whether...

Question

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.

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Solution

(1) Capital Expenditure: Paid to make an asset ready to use

(2) Capital Expenditure: Paid to make an asset ready to use

(3) Revenue Expenditure: Made for the maintenance of asset

(4) Revenue Expenditure: Part of normal operating cost

(5) Capital Expenditure: Used in business for a number of years

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Similar questions

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. 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 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 ₹ 40,000 was spent on painting the new factory.
(iii) ₹ 6,000 were paid for annual insurance premium.
(iv) ₹ 20,000 were spent on repairs before using a second hand generator purchased recently.
(v) ₹ 5,000 were spent on the repair of a machinery.
(vi) ₹ 50,000 were spent for airconditioning of the office of the manager.

Q. Pass the necessary Journal entries to rectify the following errors:
(i) ₹ 15,000 paid as wages for the construction of office building debited to Salaries Account.
(ii) ₹ 20,000 spent on the purchases of material for the construction of building debited to Purchases Account.
(iii) ₹ 50,000 spent on the extension of building was debited to Building Repairs Account.
(iv) ₹ 25,000 spent on whitewash of a new building was charged to Building Repairs Account.
(v) ₹ 1,000 paid as installation charges for newly purchased second hand machinery posted to Cartage Account.
(vi) ₹ 10,000 paid as repairing charges on the reconditioning of a newly purchased second hand machinery debited to General Expenses Account.
(vii) ₹ 5,000 paid as repairing charges of an existing machine in use charged to Machinery Account.
(viii) ₹ 10,000 paid by cheque for a printer was charged to the Office Expense Account.

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-I	List-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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