State whether the folling transactions are capital expenditureor revenueexpnditure. Given reasons : (i) ₹5,200 spent onrepairsbeforeusinga second- handcar purchased recentaly. Duringtheyears₹ 3,000 were spent on repairingof various machines.(iii) Freight and cartageonthe new machine ₹1,200, erection charges₹ 600. (iv) A sumof₹ 4,000 was spent on white -washingand painting the new factory. (v) Cost ofannualwhite-washingof building. (vi) Fire insurancepremium was paid on1 st July, 2018 for full one year ₹2,400. Booksareclosed on 31st March every year. (vii) ₹ 20,000 spent towards additionsto the machinery.(viii) ₹ 5,000 were spent in connectionwith the issue of capital and₹ 3,000 wereincurred as legal expenses inraising a debenture loan.

State whether the folling transactions are capital expenditureor reven

1.	State whether the folling transactions are capital expenditureor revenueexpnditure. Given reasons : (i) ₹5,200 spent onrepairsbeforeusinga second- handcar purchased recentaly. Duringtheyears₹ 3,000 were spent on repairingof various machines.(iii) Freight and cartageonthe new machine ₹1,200, erection charges₹ 600. (iv) A sumof₹ 4,000 was spent on white -washingand painting the new factory. (v) Cost ofannualwhite-washingof building. (vi) Fire insurancepremium was paid on1 st July, 2018 for full one year ₹2,400. Booksareclosed on 31st March every year. (vii) ₹ 20,000 spent towards additionsto the machinery.(viii) ₹ 5,000 were spent in connectionwith the issue of capital and₹ 3,000 wereincurred as legal expenses inraising a debenture loan.
Answer» <html><body><p></p>Solution :(i) Itiscapitalexpenditureandwill bedebitedtoCar Account becausetheexpenses havebeen incurred beforetheCar is put to <a href="https://interviewquestions.tuteehub.com/tag/use-1441041" style="font-weight:bold;" target="_blank" title="Click to know more about USE">USE</a>.<br/>(ii) Itisrevenue expenditurebecausetheexpenses have been incurred ontherapairs ofexistingmachines.It isanexpenditure ofroutinenature.<br/> (iii)₹ 1,800 iscapitalexpenditureand willbe <a href="https://interviewquestions.tuteehub.com/tag/debited-2043748" style="font-weight:bold;" target="_blank" title="Click to know more about DEBITED">DEBITED</a> to Machinery Account.<br/>(iv ) Asthefactoryiswhite- washedand <a href="https://interviewquestions.tuteehub.com/tag/painted-7261938" style="font-weight:bold;" target="_blank" title="Click to know more about PAINTED">PAINTED</a> forthefirst time, it shouldbetreated as capitalexpenditureandhencedebited tofactoryaccount.<br/>(v) It isrevenueexpenditurebecauseit is normalandregularexpenditure incurred with aview to maintain thebuilding. Hence itwill be debited toProfit & <a href="https://interviewquestions.tuteehub.com/tag/loss-1079380" style="font-weight:bold;" target="_blank" title="Click to know more about LOSS">LOSS</a> Account.<br/>(vi) Fire insurance premiumamountingto₹ 1,800 (i.e.,from1st July,2018 to31 stMarch,2019) isrevenueexpenditureand₹ 600 (i.e.,from1st April,2019) to30 th June,2019) isaprepaid expenseandwill becharged to next yearsrevenue.<br/>(vii) It iscapitalexpenditure, since it will result in anincrease intheearningcapacity ofthebusiness.<br/> (viii)₹ 8,000 is capitalexpendituresince it isincurred onraisingofcapitalforthebusiness.</body></html>

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