Question

The term Capital Expenditure is generally used to signify that expenditure which_______.

• A. increase quality of Fixed Asset
• B. increase quantity of Fixed Asset
• C. results in improvement/replacement of fixed asset
• D. all the three

Answer 1

The correct option is D all the three

Expenditure can be segregated as revenue expenditure and capital expenditure.

Revenue expenditure are those which are incurred on day to day smooth operation of the business.

Capital expenditure are those which gives the benefit to the business for a longer duration. Normally value of assets and heavy expenditure on an overhaul of the machine are capital expenditure. In nutshell, capital expenditure are those which:

1) Increase the quantity of Fixed Assets

2) Increase the quality of Fixed Assets

3) Improvement in productivity