classifications correct? In either case- yes or no, please giving reasons for the same. Revenue Expenditure:...

classifications correct? In either case- yes or no, please giving reasons for the same.
Revenue Expenditure:
a. Rent for new factory site
b. Customs Duty for importing new machinery for the factory
c. Repairing charges for old machinery
d. Transport facility charges for office staff
e. Installation charge of new machinery in old factory
Capital Expenditure:
f. Penalty charges for breaking traffic signal to deliver company products to customer
g. Replacing condenser of the cooling equipment for the office
h. Upgrading the office computer
i. AMC contract of new machinery
j. Licence cost of new ERP Software

Expert Solution

a. Rent of New Factory site - Yes
It is revenue expenditure as it is incurred periodically

b. Customs Duty for importing new machinery for the factory - No
Expenditure related to new machinery, till it is started using, is capitalized

c. Repairing charges for old machinery - Yes
Since it does not increase life of machinery

d. Transport facility charges for office staff - Yes
Routine expenditure

e. Installation charge of new machinery in old factory - No
Expenditure related to new machinery, till it is started using, is capitalized

f. Penalty charges for breaking traffic signal to deliver company products to customer - No
Since its benefits are not generated in future periods.

g. Replacing condenser of the cooling equipment for the office - No
Since it does not increase life of the asset

h. Upgrading the office computer - Yes
It improves the life of the asset

i. AMC contract of new machinery - No
Expenditure is for short period, benefit is not taken over the years

j. Licence cost of new ERP Software - Yes
It is cost of purchasing software the benefits of which are for many years

ekkarill92 answered 1 year ago

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