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Question
______ involves creation of liability and is shown on the liabilities side of the balance sheet.
Options
Capital expenditure
Revenue expenditure
Capital receipts
Revenue receipts
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Solution
Capital receipts involves creation of liability and is shown on the liabilities side of the balance sheet.
Explanation:
Capital receipts refer to the receipts of a non-recurring nature such as additional capital from owners, loans raised by the firm and money obtained from a sale of fixed assets. These receipts involve creation of a liability or reduction in the value of fixed assets. Capital receipts are shown on the liabilities side of the Balance Sheet.
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RELATED QUESTIONS
Distinguish between capital and revenue expenditure and state whether the following statements are items of capital or revenue expenditure:
- Expenditure incurred on repairs and whitewashing at the time of purchase of an old building in order to make it usable.
- Expenditure incurred to provide one more exit in a cinema hall in compliance with a government order.
- Registration fees paid at the time of purchase of a building.
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- The expenditure incurred in erecting a platform on which a machine will be fixed.
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