State whether the following expenses are capital or revenue in nature: Expenses on whitewhashing and painting of a building purchased to make it ready for use.
State whether the following expenses are capital or revenue in nature:
(i) Expenses on whitewhashing 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.
(vi) GST paid on purchase of new machine.
(vii) Wages paid to install a machine.
(viii) Repairs carried out on existing car.
(ix) Office block of building repainted for ₹ 50,000.
(x) Paid telephone bill of ₹ 2,500.
[Capital Expense – (i), (ii), (v), (vi), (vii); Revenue Expense – (iii), (iv), (viii), (ix) and (x).]
Anurag Pathak Changed status to publish October 12, 2023
Solution:-
I) Capital Expenses
Reason:- Expenses incurred on after purchasing an assets are included in the purchasing cost of the assets.
ii) Capital Expenses
Reason:- Expneses incurred on a new machine to make it usable is included in the purchasing cost of the assets.
iii) Revenue Expenses
Reason:- Expenses incurred in the maintenance of the old assets of the business are the Revenue Expenses.
iv) Revenue Expenses
Reason:- Insurance premium is the day to day expenses of the business.
v) Capital Expenses
Reason:- Expenditure incurred on purchasing a new assets are Capital expenses.
vi) Capital Expenses:-
Reason:- Expenditure incurred on purchasing a new assets are Capital expenses.
vii) Capital Expenses:-
Reason:- Expenditure incurred on a new machine to make it usable in business are included in the purchasing cost of the machine. thus installation charges of a new machine are Capital expenditures.
viii) Revenue Expenses:-
Reason:- Expenses incurred on maintenance of the existing assets are considered as day to day expenses of the business. Thus Repairs of existing car are Revenue Expenses.
ix) Revenue Expenses
Reason:- Expenses incurred on maintenance of the existing assets are considered as day-to-day expenses of the business. Thus expenses of repainted of office blocks are Revenue Expenses.
x) Telephone Bill:-
Reason:- Expenses on Telephone bill are day to day expenses of the business. Thus are Revenue Expenses.
Anurag Pathak Changed status to publish October 12, 2023
