Which of the following should not be treated as revenue expenditure?
Correct answer: D. Sales tax paid in connection with the purchase of office equipment
- A. Interest on loans and debentures
- B. Annual fire insurance premiums on Plant and Equipment
- C. Small expenditures on long- lived assets, such as ` 20 for a paper weight.
- D. Sales tax paid in connection with the purchase of office equipment
Explanation
Sales tax paid to acquire office equipment is directly attributable to its purchase and forms part of the equipment's capital cost. Interest, insurance and immaterial small items are generally charged as revenue expenditure in this context.
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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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