The expenditure incurred for enhancing the capacity of an existing equipment is a ______________

revenue expenditure

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deferred revenue expenditure

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capital expenditure

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charge on the profit of the business.

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Solution

The correct option is A capital expenditure
Revenue expenditure are those which are incurred for day to day business operations.
Capital expenditure are those which are incurred for procuring an asset. Like purchase of plant, major repairs of plant for enhancing the capacity, building etc. These expenditure helps to increase the production capacity of an asset.
The expenditure incurred for enhancing the capacity of an existing equipment is a capital expenditure.

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Similar questions

Distinguish between capital and revenue expenditure and state whether the following statements are items of capital or revenue expenditure.
(a) Expenditure incurred on repairs and whitewashing at the time of purchase of an old building in order to make it usable.
(b) Expenditure incurred to provide one more exit in a cinema hall in compliance with a government order.
(c) Registration fees paid at the time of purchase of a building.
(d) Expenditure incurred in the maintenance of a tea garden which will produce tea after four years.
(e) Depreciation charged on a plant.
(f) The expenditure incurred in erecting a platform on which a machine will be fixed.
(g) Advertising expenditure, the benefits of which will last for four years.

Q. Heavy expenditure incurred on advertisement at the time of introducing a new product is a Deferred Revenue Expenditure.

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

Q. Treating a revenue expense as a capital expenditure is an example of __________.

Q. The adjustment entry to write off deferred revenue expenditure is?

Deferred Revenue Expenditure A/c To Profit & Loss A/c	Dr.
Expense A/c To Profit & Loss A/c	Dr.
Profit & Loss A/c To Provision for Expense A/c	Dr.
Profit & Loss A/c To Deferred Revenue Expenditure A/c	Dr.

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