Capital and Revenue Expenditures and Receipts

1. What is the primary determinant for transferring expenditure to the profit and loss account?

2. Which of the following is an example of capital expenditure?

3. Which of the following is a revenue receipt?

4. What is the treatment of legal fees paid to acquire property?

5. Which of the following is a capital receipt?

6. What is the classification of expenses incurred for the first-time repair and whitewashing of an old building?

7. Which of the following is a key difference between capital and revenue expenditures?

8. How is the cost of temporary huts constructed for the purpose of building a cinema hall classified?

9. What is the classification of overhauling expenses incurred to improve the fuel efficiency of a motor car?

10. Which of the following is a revenue expenditure?

11. What is the classification of expenses incurred for the demolition of a building to construct a bigger one on the same site?

12. Which of the following is a consideration in distinguishing between capital and revenue expenditures?

13. What is the classification of insurance claim received for a machinery damaged by fire?

14. Which of the following is a revenue receipt?

15. What is the classification of expenses incurred for the replacement of worn-out parts of a machine?

16. Which of the following is an example of a prepaid expense?

17. What is the classification of expenses incurred for the inauguration of a new manufacturing unit?

18. Which of the following is a capital receipt?

19. What is the classification of expenses incurred for transportation of machinery purchased?

20. Which of the following is a revenue expenditure?

1. A company replaces the roof of its factory building to extend its useful life by 10 years. How should this expenditure be classified?

2. When a software development company incurs salaries for programmers creating a new product for future sale, how should these costs be treated?

3. A pharmaceutical company spends ₹50 lakh on clinical trials for a new drug. The drug receives regulatory approval. How should these costs be treated?

4. A manufacturing firm receives a government grant specifically for purchasing new equipment. How should this be classified?

5. A retailer spends ₹10 lakh on a marketing campaign that is expected to benefit sales over the next 3 years. The proper accounting treatment is:

6. A company pays ₹25 lakh as key money to acquire a prime retail location. This payment should be:

7. When a company incurs costs to relocate its headquarters to a new city, these costs should generally be:

8. A company receives an insurance settlement for a destroyed warehouse. The amount exceeds the book value. The excess should be:

9. Costs incurred to train employees on a new ERP system should be:

10. A company spends ₹15 lakh to modify its production line to accommodate a new product. This expenditure is:

11. When a company receives an advance payment for a 3-year service contract, the initial receipt is:

12. Costs incurred to defend a patent infringement lawsuit should be:

13. A company receives a subsidy specifically for modernizing its plant equipment. This is:

14. Expenditure on a major overhaul that increases a machine’s production capacity by 30% is:

15. A company receives a refund of customs duty paid on imported machinery. This should be:

16. Costs incurred to relocate utility lines during construction of a new factory should be:

17. When a company receives compensation for compulsory acquisition of its land, this is:

18. Expenditure on a feasibility study for a potential new product line should be:

19. A company receives a non-refundable deposit from a customer for future services. Initially, this is:

20. Costs incurred to demolish an old building on newly acquired land should be: