State whether following expenditures are capital or revenue in nature (i) Second -hand car was purchased for a sum of Rs 1,00,000. A sum of Rs 10,000 was spent on its overhauling (ii) Rs 25,000 paid for the installation of a new machine. (iii) Repairs for Rs 5,000 negligence (iv) Cost of annul taxes paid and the car mentioned above (v) Cost of air-conditioning of the office of the General Manager

State whether following expenditures are capital or revenue in nature

1.	State whether following expenditures are capital or revenue in nature (i) Second -hand car was purchased for a sum of Rs 1,00,000. A sum of Rs 10,000 was spent on its overhauling (ii) Rs 25,000 paid for the installation of a new machine. (iii) Repairs for Rs 5,000 negligence (iv) Cost of annul taxes paid and the car mentioned above (v) Cost of air-conditioning of the office of the General Manager
Answer» <html><body><p></p>Solution :(i) Total <a href="https://interviewquestions.tuteehub.com/tag/expenditure-980222" style="font-weight:bold;" target="_blank" title="Click to know more about EXPENDITURE">EXPENDITURE</a> of Rs 1,10,000 is Capital Expenditure. A sum of Rs 1,00,000 was spent on a capital asset while <a href="https://interviewquestions.tuteehub.com/tag/another-876628" style="font-weight:bold;" target="_blank" title="Click to know more about ANOTHER">ANOTHER</a> Rs 10,000 was spent for making the capital asset ready for use. <br/> (ii) Cost of installing the <a href="https://interviewquestions.tuteehub.com/tag/new-1114486" style="font-weight:bold;" target="_blank" title="Click to know more about NEW">NEW</a> machine is a Capital Expenditure because the amonutspent is up to the point when the asset is ready for use. <br/> (iii) Repair charges are <a href="https://interviewquestions.tuteehub.com/tag/revenue-1188040" style="font-weight:bold;" target="_blank" title="Click to know more about REVENUE">REVENUE</a> Expenditure since they are for maintaining an asset and not for improving the asset. <br/> (iv) Annual taxes and <a href="https://interviewquestions.tuteehub.com/tag/insurance-22907" style="font-weight:bold;" target="_blank" title="Click to know more about INSURANCE">INSURANCE</a> premium paid on the car are Revenue Expenditure because they do not add to the value of the car and their benefit will be exhausted within the year. <br/> (v) It is Capital Expenditure because the benefit of this expenditure will be available for a number of years</body></html>

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