Question

In: Accounting

Which of the following expenditures should be expensed (debited to an expense account)? A refrigeration system...

Which of the following expenditures should be expensed (debited to an expense account)? A refrigeration system added to a tractor trailer. The replacement of an engine on an airplane. An oil change for a delivery vehicle. The addition of a garage to a home.

Solutions

Expert Solution

All the revenue expenses incurred by the company are to be debited to the the expense account whereas all the capital expense are to be capitalised to the particular asset for which the expense has been incurred.

Revenue expense tattoo expense which are incurred on a normal course of business and do not increase the life of the asset. Revenue expenditure incurred in order to maintain the original efficiency of the asset. when is on the other hand capital expenditure are the expense which are incurred in order to enhance the life of the asset.

Therefore a refrigerator added to the the tractor trailer is a type of capital expenditure also replacement of engine in aeroplane is also a capital expenditure because it enhances the life of the aeroplane.

However a regular oil change for delivery vehicle is a type of revenue expenditure as it do not enhance the life of the acid but it maintains the efficiency of the asset and therefore is to be debited to the expense account.

Therefore the correct option is 3rd.


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