Which condition most clearly distinguishes a capital expenditure from an ordinary repair expense on a non-current asset?
Correct answer: D. It extends useful life or increases productive capacity
- A. It is paid through the business bank account
- B. It is supported by a supplier invoice
- C. It is incurred during the final month of the year
- D. It extends useful life or increases productive capacity
Explanation
Expenditure that extends useful life, improves performance, or increases productive capacity usually creates future economic benefits and is capitalized. Routine repairs normally maintain the asset's existing condition and are charged as an expense.
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About Depreciation and Non-Current Assets
Non-current assets are long-term resources recorded at cost and reduced by accumulated depreciation to show their carrying amount. Coverage includes straight-line and reducing-balance methods, residual value, useful life, depreciation adjustments, capital and revenue expenditure, and the profit or loss arising when an asset is disposed of.
Practise Depreciation and Non-Current Assets
33 free Depreciation and Non-Current Assets MCQs from Accounting, each with the correct answer and an explanation. Unlimited attempts, no account needed.
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