Question

Observe the image and state the reason why it is Capital Expenditure.

विकल्प

• As it is incurred for maintaining an existing asset.

• As there is an increase in the value of a fixed asset.

• It is incurred for erection of a fixed asset.

• It results in increasing the working life of the plant.

Answer 1

It results in increasing the working life of the plant.

Explanation:

Replacing or installing a new sewing machine increases the plant’s working life and earning capacity and enhances a fixed asset; such costs are capitalised as capital expenditure because they benefit future accounting periods.