Which expenditure on an existing machine is normally treated as revenue expenditure rather than capital expenditure?
Correct answer: C. Routine oiling and minor repairs
- A. Installing a major production component
- B. Extending the machine's useful life
- C. Routine oiling and minor repairs
- D. Adding a new operating capacity
Explanation
Routine oiling and minor repairs maintain the machine's existing condition and are normally charged as revenue expenditure. Major improvements that increase capacity or useful life are generally capitalized.
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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.
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