Which item is normally regarded as a revenue expenditure?
Correct answer: C. Annual insurance premium for the office
- A. Purchase of land for business use
- B. Construction of a factory building
- C. Annual insurance premium for the office
- D. Installation of a new production line
Explanation
An annual insurance premium supports the current period and does not create a long-term asset. Land, a building, and a production line are capital items because they provide benefits over several periods.
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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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