Question

Capital expenditure means the expenditure the benefit of which is not exhausted within the current year. Give examples.

Answer 1

1. Capital expenditure means the expenditure the benefit of which is not exhausted within the current year but is enjoyed over a long time period. Such expenditure is of a non-recurring nature and results in the acquisition of permanent assets.
2. Property acquired with the help of capital expenditure is utilised by the business for a long time, and thereby it earns revenue. Thus, all expenditures incurred to acquire or increase the value of fixed assets which are used in the business for the purpose of earning revenue are called capital expenditure.
3. Some examples of capital expenditure are given below:
   1. Purchase of land, building, plant and machinery, equipment, furniture, loose tools, etc.
   2. Cost of addition, extension and improvements to existing fixed assets.
   3. Cost of overhauling second-hand machines.
   4. Expenses incurred for putting an asset into a working condition.