Question

Expenses incurred to repair a second-hand machine, purchase by the firm, to make it usable are treated under which expenditure?

Options

• Revenue

• Capital

• Deferred revenue

• Capital loss

Answer 1

Capital

Explanation:

Expenditure incurred for the extension of or improvement in fixed assets is also capital expenditure. Such expenditure e.g. over hauling of second hand machinery, etc. helps to increase the profit earning, capacity of business by increasing output or reducing costs.