Which of the following is an item of capital expenditure?
Correct answer: C. Installation charges paid in conjunction with the purchase of Office Equipment
- A. Research and development costs during the year
- B. Interest on borrowed fund utilized for acquisition of Office Furniture
- C. Installation charges paid in conjunction with the purchase of Office Equipment
- D. Monthly rent of a machinery used in the business
Explanation
Installation charges directly incurred to make office equipment ready for use form part of the equipment's acquisition cost. Rent and ordinary research costs are revenue expenses, while interest on borrowing for ordinary office furniture is not normally capitalised.
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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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