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Question

Wages paid on the erection of a new machinery should be debited to___________.

A
wages A/c
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B
machinery A/c
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C
cash A/c
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D
either (a) or (b)
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Solution

The correct option is B machinery A/c
It is a Capital expenditure.
Machinery is a permanent asset of the business and can be used for many years but it will not benefit to the business until it is installed and erected at a proper place. So amount spent on purchase of machinery, on its installation and erection is a capital expenditure.

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