A business pays legal fees to defend an ordinary customer claim arising from its normal operations. These fees are generally classified as:
Correct answer: A. Revenue expenditure
- A. Revenue expenditure
- B. Capital expenditure
- C. Capital receipt
- D. Drawings
Explanation
Legal fees arising from routine operations provide a current-period benefit and are normally charged as revenue expenditure. They do not acquire or improve a long-term asset and are not an owner withdrawal.
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About Accounting Principles
Accounting principles explain the rules used to record, classify and report business transactions. Coverage includes the accounting equation, double-entry system, accrual and cash bases, matching and prudence concepts, consistency, going concern, business entity, and the difference between capital and revenue items.
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