Question

Which of the following is/ are not example of capital expenditure__________________________.

• A. Money spent to reduce working expenses like conversion of hand-driven machinery to power-driven machinery
• B. Money paid for goodwill (like the right to use the established name of an outgoing firm)
• C. Expenditure which does not result in an increase in capacity or in reduction of day-to-day expenses
• D. All of the above

Answer 1

The correct option is C Expenditure which does not result in an increase in capacity or in reduction of day-to-day expenses

Capital expenditure refers to an amount spent to acquire or upgrade productive assets in order to increase the efficiency or capacity of the company for more than one accounting period.

Also called capital spending. Conversion of hand driven machinery to power driven machinery improve the efficiency of company. Goodwill once purchased will increase the profits of the company for more than one accounting period. Only the expenditures which does not result in an increase in capacity or in reduction of day to day expenses are not capital expenditure.