Which expenditure is most likely to be revenue expenditure?
Correct answer: B. Replacing a worn-out part during routine operations
- A. Constructing an additional factory building
- B. Replacing a worn-out part during routine operations
- C. Purchasing a new delivery truck
- D. Installing a new production line
Explanation
Routine replacement that maintains an asset in its existing condition is normally revenue expenditure. Construction, vehicles and production lines usually provide benefits over several periods and are capital items.
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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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