Which expenditure is most likely to be treated as capital expenditure?
Correct answer: D. Cost of constructing an additional factory room
- A. Monthly office electricity
- B. Annual staff training cost
- C. Routine cleaning of business premises
- D. Cost of constructing an additional factory room
Explanation
Constructing an additional factory room creates or improves a long-term operating asset, so its cost is capital expenditure. The other costs normally provide benefits consumed during the current period.
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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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