Which of these types of expenditure would not be treated as a Capital Expenditure?
Correct answer: A. Maintenance of the Asset
- A. Maintenance of the Asset
- B. Extension of an Asset
- C. Improvement of the existing Asset
- D. Acquisition of an Asset
Explanation
Maintenance merely preserves an existing asset's operating condition and does not increase its life, capacity, or efficiency, so it is treated as revenue expenditure. Acquisition, extension, and improvement create or enhance long-term benefits and are capital expenditure.
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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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