2023 · Q41
Which of the following is not a capital expenditure?
Indian EconomyFiscal policy and budget
- A₹5,000 spent to remove a worn- out part. This part needs to be replaced with a new engine
- BExpenses on foreign tour for purchasing a new machine.
- CFreight and Insurance of the machinery purchased
- DAmount spent on repairing a secondhand machine before put to use
Explanation
Capital expenditure creates or improves a fixed asset. Foreign-tour costs incurred to purchase a machine (B), freight and insurance on purchased machinery (C), and repairs to a second-hand machine before it is put to use (D) all form part of the asset's cost. Merely removing a worn-out part for Rs. 5,000 is routine revenue expenditure on repairs, not a capital outlay. Hence A.