Capital and Revenue Expenditure/ Income — Important Questions
ICSE · Class 11 · Accountancy
65 important questions from Capital and Revenue Expenditure/ Income for ICSE Class 11 Accountancy, with answers.
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Important Questions from Capital and Revenue Expenditure/ Income
A business buys a farm for ₹1,50,000 and also pays annual land revenue of ₹2,000. What is the correct classification for both items?
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Farm purchase: Capital expenditure; land revenue: Revenue expenditure
Purchase of a farm is acquisition of a fixed asset, so it is capital expenditure. Annual land revenue is a regular business payment, so it is revenue expenditure.
A machine is bought second-hand and ₹5,000 is spent on immediate repairs before use. What is the classification of this repair cost?
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Capital expenditure
Immediate repairs on a newly purchased second-hand asset to make it fit for use are treated as capital expenditure because they are part of preparing the asset for use.
A building sold for ₹12,00,000 had originally cost ₹10,00,000. What is the capital income and how is it found?
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₹2,00,000, found by sale price minus cost
Capital income is the profit on sale of a fixed asset. It is calculated as sale price minus cost: ₹12,00,000 − ₹10,00,000 = ₹2,00,000.
A building purchased for ₹50,000 is sold for ₹45,000. What is the capital loss and how is it computed?
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₹5,000, found by cost minus sale price
Capital loss is the shortfall when a fixed asset is sold below cost. The loss is ₹50,000 − ₹45,000 = ₹5,000.
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