Distinguish between capital and revenue expenditure and state whether the following statements are items of capital or revenue expenditure :
(a) Expenditure incurred on repairs and whitewashing at the time of purchase of an old building in order to make it usable.
(b) Expenditure incurred to provide one more exit in a cinema hall in compliance with a government order.
(c) Registration fees paid at the time of purchase of a building.
(d) Expenditure incurred in the maintenance of a tea garden which will produce tea after four years.
(e) Depreciation charged on a plant.
(f) The expenditure incurred in erecting a platform on which a machine will be fixed.
(g) Advertising expenditure, the benefits of which will last for four years.
When the benefit of expenditure is to be received over a series of accounting years, it is termed as capital expenditure. Account incurred on purchase of fixed assets like land and building, plant and machinery, patents,trademark etc is termed as capital expenditure because the benefit is to be received over a number of years.
On the other hand, when the benefit of expenditure is confined to a short period of time, normally a year, it is termed as revenue expenditure. e.g., rent of building, salaries, insurance premium, wages,audit fees etc.
(a) Expenditure incurred on repairs and whitewashing at the time of purchase of an old building in order to make it usable.
Ans:- (Capital Expenditure)
(b) Expenditure incurred to provide one more exit in a cinema hall in compliance with a government order.
Ans:- (Capital Expenditure).
(c) Registration fees paid at the time of purchase of a building
Ans:- (Capital Expenditure).
(d) Expenditure incurred in the maintenance of a tea garden which will produce tea after four years.
Ans:- (Revenue Expenditure).
(e) Depreciation charged on a plant.
Ans:- (Revenue Expenditure).
(f) The expenditure incurred in erecting a platform on which a machine will be fixed.
Ans:- (Capital Expenditure).
(g) Advertising expenditure, the benefits of which will last for four years.
Ans:- (Revenue Expenditure).
Popular Questions of Class 11 Accountancy
- Q:- Explain the qualitative characteristics of accounting information.
- Q:-
Mr. Sunrise started a business for buying and selling of stationery with ₹ 5,00,000 as an initial investment. Of which he paid ₹ 1,00,000 for furniture, ₹ 2,00,000 for buying stationery items. He employed a sales person and clerk. At the end of the month he paid ₹ 5,000 as their salaries. Out of the stationery bought he sold some stationery for ₹ 1,50,000 for cash and some other stationery for ₹ 1,00,000 on credit basis to Mr. Ravi. Subsequently, he bought stationery items of ₹ 1,50,000 from Mr. Peace. In the first week of next month there was a fire accident and he lost ₹ 30,000 worth of stationery. A part of the machinery, which cost ₹ 40,000, was sold for ₹ 45,000.
From the above, answer the following :
1. What is the amount of capital with which Mr. Sunrise started business?
2. What are the fixed assets he bought?
3. What is the value of the goods purchased?
4. Who is the creditor and state the amount payable to him?
5. What are the expenses?
6. What is the gain he earned?
7. What is the loss he incurred?
8. Who is the debtor? What is the amount receivable from him?
9. What is the total amount of expenses and losses incurred?
10. Determine if the following are assets, liabilities, revenues, expenses or none of the these: sales, debtors, creditors, salary to manager, discount to debtors, drawings by the owner. - Q:- Describe the role of accounting in the modern world.
- Q:- What do you mean by an asset and what are different types of assets?
- Q:-
Differentiate between source documents and vouchers.
- Q:-
Complete the following sentences with appropriate words:
(a) Information in financial reports is based on .....................
(b) Internal users are the ..................... of the business entity.
(c) A ..................... would most likely use an entities financial report to determine whether or not the business entity is eligible for a loan.
(d) The Internet has assisted in decreasing the ..................... in issuing financial reports to users.
(e) ..................... users are groups outside the business entity, who uses the information to make decisions about the business entity.
(f) Information is said to be relevent if it is ......................
(g) The process of accounting starts with ............ and ends with ............
(h) Accounting measures the business transactions in terms of ............ units.
(i) Identified and measured economic events should be recording in ............ order. - Q:-
What is a journal? Give a specimen of journal showing at least five entries.
- Q:-
Define accounting and state its objectives.
- Q:-
Enumerate informational needs of management.
- Q:-
Complete the following work sheet:
(i) If a firm believes that some of its debtors may ′default′, it should act on this by making sure that all possible losses are recorded in the books. This is an example of the ___________ concept.
(ii) The fact that a business is separate and distinguishable from its owner is best exemplified by the ___________ concept.
(iii) Everything a firm owns, it also owns out to somebody. This co-incidence is explained by the ___________ concept.
(iv) The ___________ concept states that if straight line method of depreciation is used in one year, then it should also be used in the next year.
(v) A firm may hold stock which is heavily in demand. Consequently, the market value of this stock may be increased. Normal accounting procedure is to ignore this because of the ___________.
(vi) If a firm receives an order for goods, it would not be included in the sales figure owing to the ___________.
(vii) The management of a firm is remarkably incompetent, but the firms accountants can not take this into account while preparing book of accounts because of ________ concept.
Recently Viewed Questions of Class 11 Accountancy
- Q:-
The journal entry to record the sale of services on credit should include:
(a) Debit to debtors and credit to capital.
(b) Debit to cash and Credit to debtors.
(c) Debit to fees income and Credit to debtors.
(d) Debit to debtors and Credit to fees income. - Q:-
What entry (debit or credit) would you make to:
(a) increase revenue
(b) decrease in expense,
(c) record drawings
(d) record the fresh capital introduced by the owner. - Q:-
Trial balance is:
(a) An account.
(b) A statement.
(c) A subsidiary book.
(d) A principal book. - Q:-
What is an operating profit?
- Q:-
Show the effect through Journal entries:
Credit sales to Mohan 10,000 were posted to his account as 12,000
This is an error of ..................................
The wrong effect has been:The correct effect should have been:
The rectification entry will be.
- Q:-
Define accounting.
- Q:-
Name any two types of commonly used negotiable instruments.
- Q:-
Which stakeholder group... would be most interested in
_____________________________ (a) the VAT and other tax liabilities of the firm
_____________________________ (b) the potential for pay awards and bouns deals
_____________________________ (c) the ethical or environmental activities of the firm
_____________________________ (d) whether the firm has a long-term future
_____________________________ (e) profitability and share performance
_____________________________ (f) the ability of the firm to carry on providing a
service or producing a product. - Q:-
Cash paid to Neha 2,000 was not posted to her account.
This is an error of ..................................
The wrong effect has been:The correct effect should have been:
The rectification entry will be.
- Q:-
The journal entry to record purchase of equipment for ₹ 2,00,000 cash and a balance of ₹ 8,00,000 due in 30 days include:
(a) Debit equipment for ₹ 2,00,000 and Credit cash ₹ 2,00,000.
(b) Debit equipment for ₹ 10,00,000 and Credit cash ₹ 2,00,000 and creditors ₹ 8,00,000.
(c) Debit equipment ₹ 2,00,000 and Credit debtors ₹ 8,00,000.
(d) Debit equipment ₹ 10,00,000 and Credit cash ₹ 10,00,000.
- NCERT Chapter