Which of the following below is an example of a capital expenditure? a. cleaning the carpet in the front room b. replacing all burned-out light bulbs in the factory c. replacing an engine in a company car d. tune-up for a company truck

Question

Clare Bender

Business

6 January, 10:29

Which of the following below is an example of a capital expenditure? a. cleaning the carpet in the front room b. replacing all burned-out light bulbs in the factory c. replacing an engine in a company car d. tune-up for a company truck

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Answers (1)

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Raquel Watkins · Answer 1

c. replacing an engine in a company car

Explanation:

Capital Expenditure are long term expenditures incurred on non current assets, whose effect continues beyond an accounting year. Ex : Plant, Building Repair

Revenue Expenditure are short term expenses, incurred for day to day functioning on current assets, whose effect is only in short term. Ex : Petty repairs.

Carpet Cleaning, Bulbs replacement, Tune up are all Revenue Expenditures. Replacing engine of a company's car is a non current asset (car) repair which significantly effects the business life of asset in long run. So, It is a Capital Expenditure