2023 · Q61
Overhauling expenses of Rs. 25,000 for the engine of a motor car to get better fuel efficiency is:
General Accounting Principles, Auditing and InsuranceRecording transactions
- ADeferred revenue expenditure
- BRevenue receipt
- CCapital expenditure
- DRevenue expenditure
Explanation
Overhauling the engine to secure better fuel efficiency improves the asset's performance beyond its original condition, giving an enduring benefit. Expenditure that enhances the capacity or efficiency of a fixed asset is capital expenditure, not a routine revenue expense. It is not a receipt at all, and 'deferred revenue expenditure' applies to heavy revenue-type outlays, not asset improvements. Hence (c) is correct.