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Standard XI
Business Studies
Functions of Insurance
Which one of ...
Question

Which one of the following should be considered as revenue expenditure?

A
Rs. 1000 paid for the execution of a new plant
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B
Loss of Rs. 10000 incurred in increasing the sitting accommodation of hotel
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C
Damage paid on account of breach of a contract to supply certain goods
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D
Repairs to machinery purchased
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Solution

The correct option is A Damage paid on account of breach of a contract to supply certain goods
Damaged paid on account of breach of contract is a revenue expenditure as its incurred during the course of business activity.

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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.

Trial balance of Madan did not agree and he put the difference to the suspense account. He discovered the following errors.

(a) Sales return book overcast by Rs. 800.

(b) Purchase return to Sahu Rs. 2,000 were not posted.

(c) Goods purchased on credit from Narula Rs. 4,000 though taken into stock, but no entry was passed in the books.

(d) Installation charges on new machinery purchased Rs. 500 were debited to sundry expenses account as Rs. 50.

(e) Rent paid for residential accommodation of Madan (the proprietor) Rs. 1400 was debited to rent account as Rs. 1,000.

Rectify the errors and prepare a suspense account to ascertain the difference in trial balance.

Q.

Trial balance of Madan did not agree and he put the difference to suspense account. He discovered the following errors:

(a)

Sales return book overcast by Rs 800.

(b)

Purchases return to Sahu Rs 2,000 were not posted.

(c)

Goods purchased on credit from Narula Rs 4,000 though taken into stock, but no entry was passed in the books.

(d)

Installation charges on new machinery purchased Rs 500 were debited to sundry expenses account as Rs 50.

(e)

Rent paid for residential accommodation of madam (the proprietor) Rs 1,400 was debited to Rent account as Rs 1,000.

Rectify the errors and prepare suspense account to ascertain the difference in trial balance.

Q. 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.
Q.

Following transactions have occurred. Find the total expenditure to be carried to Repair expenditure.

`- Rs 500 paid for installation of machinery was debited to wages account

`- Rs 5000 paid for extension of building was debited to repairs account

`- Rs 2000 paid for repair of an existing machine was debited to machinery account


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