Which of the following is a capital expenditure?
Correct answer: C. Cost of stand by equipment
- A. Repair of plant and machinery
- B. Salary paid to workers
- C. Cost of stand by equipment
- D. Annual whitewash of the office building
Explanation
Standby equipment is acquired for long-term use in the business and is recorded as a fixed asset, making its cost capital expenditure. Repairs, workers' salaries, and annual whitewashing are ordinary operating expenses.
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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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