Revenue Expenditure wrongly recorded as Capital Expenditure will result in: Overstatement of net profit and understatement of assets, Overstatement of net profit and overstatement of assets, Understatement of net profit and overstatement of assets, Understatement of net profit and understatement of assets. 2,99,000. Building repairs, $3500, were debited to the Buildings account. 500 paid as wages for erection of machinery? income statement showed a loss for the year of $3500. Capital expenditure is not matched with the capital receipts. Welcome to “Capital and Revenue Expenditure and Receipts” topic. Business receipts are inflow of economic resources mostly in the form of cash and cash equivalents. How would this affect the profit for the year and the non-current assets? Buildings were depreciated at 5% per annum on balance of the account at the year end. Capital receipts; Revenue receipts; Capital receipts Explanation: Capital receipts include the following: Receipts from the sale of fixed assets of a business. disinvestment of PSUs. 10,000 as insurance, Rs. 18. Online Quiz in Rectification of Errors in Fundamentals of Accounting for preparation of professional exams of ca cpt,ca foundation,cs foundation,cma foundation Incorrect treatment of Capital and Revenue Expenditure and Receipts effects the profit for the year and values in the Statement of Financial Position. Ramamohan . 14.David’s profit for the year and non-current assets? Difference between Capital and Revenue expenditure. What was the. So don't neglect practicing multiple choice questions. Unlike revenue expenditure, which is … long questions & short questions for CA Foundation on EduRev as well by searching above. They break down differently, depending on the size of the payment and the time across which it needs to be paid for. Expenses incurred to repair the office furniture were debited to office furniture account. What is the effect on the financial statements? cost of office equipment was debited to Cost of improvement in electric wiring system = 19000 Capital transactions are transactions that have a long-term effect on the business. The price included $50 for cartridge refill. Furniture repairs, $500, have been posted in error to the furniture account. Whitewash expenses = 5000 Medium term loan obtained from bank for augmenting working capital is: Amount spent on unsuccessful patent right is a : Revenue Expenditure (Even though the amount is large), Deferred Revenue Expenditure (If the amount is large). Explain school property and computers in the ICT lab as Capital expenditure. Amount received from IDBI as a medium term loan for augmenting working capital. Cartage and Freight − If those are incurred to bring Fixed Assets. Capital expenditures vs. revenue expenditures. Expenditure means spending on something. for example, when a fixed asset is sold for $22,000 and its cost is $20,000. 10,00,000 towards construction of office building. A Computer system cost $9050. $600, had been debited to motor vehicles. the profit for the year and non-current assets? (B) Repayment of loan is also capital expenditure because it reduces liability. It also spent Rs. Question: Capital receipts are not directly credited to profit and loss account. Reply. Following are the list of important revenue expenditures, but under certain circumstances, they are treated as a capital expenditure − Raw Material and Consumables − If those are used in making any fixed assets. While revenue expenses are short-term expenses that are for specific operating periods. It means that the effect of these transactions extends to a period of more than one year. An amount of Rs. the purchases account in error. An item of revenue expenditure has been incorrectly treated as capital expenditure. Reply. Buildings were depreciated at 5% per annum on balance of the account at the year end. Revenue Receipt. 20. He paid Rs. Q.5 Which of the following statement is false? Dec 22,2020 - Test: Capital And Revenue Expenditures And Receipts - 1 | 30 Questions MCQ Test has questions of CA Foundation preparation. What amount should be debited to Car A/c? 5,60,000 and incurred Rs. Capital and Revenue Expenditures and Receipts. CAPITAL AND REVENUE EXPENDITURES AND RECEIPTS . © 2017-2021 Accounting-Daddy.Com, All rights reserved, more Capital and Revenue Expenditure Multiple choice questionsÂ, Control Accounts Multiple Choice Questions, purchase of delivery vehicle for sales department. Revenue Expenditure Treated as Capital Expenditure. Click here to check your Answers for Capital and Revenue Expenditure Multiple choice questions. © 2017-2021 Accounting-Daddy.Com, All rights reserved  l  Privacy Policy  l  Disclaimer  l  Contact Us  l KaaruKamani, David’s What is the effect of the error? Deferred Revenue Expenditure is revenue expenditure, incurred to receive benefits over a number of years say 3 or 5 years. expenditure: (a) salary paid to army officer (b)loan given to union territories. 20,000. Syed alfaz . Online Quiz in Rectification of Errors in Fundamentals of Accounting for preparation of professional exams of ca cpt, ca foundation, cs foundation, cma foundation,and also for B.com, M.com, MBA Click here to Login/Sign Up. This test is Rated positive by 87% students preparing for CA Foundation.This MCQ test is related to CA Foundation syllabus, prepared by CA Foundation teachers. It is the process of causing a liability by a commodity. 15. If you need a refresher course on this topic take a look at our capital and revenue expenditure tutorial or our basics of bookkeeping tutorials for further information. Machinery was purchased for Rs. The questions are almost basic level, feels to have more standard questions….. anyway its good to have…Thanks you. Capital receipts The receipts which create corresponding liability for the government or lead to reduction in assets of the government are termed as capital receipts, e.g. The solved questions answers in this Test: Capital And Revenue Expenditures And Receipts - 1 quiz give you a good mix of easy questions and tough questions. Reply. CA Foundation It leads to an overall increase in the total revenue of the company.These funds are generated from a firm’s operating activities hence they are shown inside trading and profit and loss account and not in a balance sheet.. cost of extension building = 250000 What is the effect of this error? This contains 30 Multiple Choice Questions for CA Foundation Test: Capital And Revenue Expenditures And Receipts - 2 (mcq) to study with solutions a complete question … B . 2,500 spent on the overhaul of machines purchased second-hand. On the other hand, sale of stock, commission received and interest on investment received are examples of revenue receipts. Revenue transactions are transactions that have a short-term effect on the business. ‘A’ purchased a Car on 1.06.2010 for Rs. Remember Multiple choice questions are having good weightage in the … You may click the link to find Multiple choice questions (Q.No-1 to 10) on Capital and Revenue Receipts and Payments. i. 11. Capital Expenditures and Revenue Expenditures; The following sources are the generators of the capital receipt: Additional capital and mentioned assets introduced by the owner or the possessor; Debentures and the other issues of debt instruments; Loans borrowed from a bank or from a financial institution. A retail trader treated a capital expenditure item as revenue expenditure. Capital Expenditures and Revenue Expenditures. This mock test of Test: Capital And Revenue Expenditures And Receipts - 2 for CA Foundation helps you for every CA Foundation entrance exam. Assets and Liabilities totals will not balance in the statement of financial position. 60,000 as his salary during the period of construction and he devoted 2/3rd of his time for the building construction. (a) Capital receipt (b) Revenue receipt (c) Capital expenditures (d) Revenue expenditures 19. students definitely take this Test: Capital And Revenue Expenditures And Receipts - 1 exercise for a better result in the exam. Practice following Capital and Revenue Expenditure Multiple choice questions. the capital receipts $22,000 is not credited to profit and loss account. giving reasons identify the following as revenue expenditure or capital. This is a: Which of the following Expenses will not be included in the acquisition of plant? 1,500 for petrol. It was later discovered that repairs to motor vehicles, 1,200 is paid as dealer’s commission. 13. The Going Concern Assumption allows the accountant to classify the expenditure as Capital Expenditures and Revenue Expenditures, capital receipts and capital revenues. You may click the link to find Multiple choice questions (Q.No-1 to 10) on Capital and Revenue Receipts and Payments.. Receipts are the amounts actually received. Fuel cost for running this care is revenue expenditure and it will be used up in few days and does not add to the value of the fixed asset. 5,000, cost of extension of building is Rs. Multiple choice questions (MCQs) Chhavi sharma . An item of revenue expenditure has been incorrectly treated as capital expenditure. The following Capital and Revenue Receipts worksheet -2 covers all the aspects of Capital and Revenue Expenditure and Receipts. Which of the following are revenue expenditure for an office equipment dealer? What is the effect of this error? These expenditures are met out of capital receipts of the government including capital … Amount spent on increasing the seating capacity in a cinema hall is: Heavy advertisement expenditure should be treated as : Expenditure incurred of Rs. (c) pension paid to retired government employees. Buy a car is capital expenditure because its benefit to the business will be spread over a long time. 20,000 for trial run of a newly installed machinery would be: This mock test of Test: Capital And Revenue Expenditures And Receipts - 1 for CA Foundation helps you for every CA Foundation entrance exam. answer: (a) salary paid to army office The receipts of business are of two kinds:-. On the contrary, revenue expenditure aims at maintaining the earning capacity of the company. Capital expenditure is the expenditure that a business incurs on the purchase, alteration or the improvement of fixed assets. This contains 30 Multiple Choice Questions for CA Foundation Test: Capital And Revenue Expenditures And Receipts - 1 (mcq) to study with solutions a complete question bank. Click here to Login/Sign Up. Rs. Capital and Revenue Expenditure and Receipts. This distinction between capital and revenue nature of the items is necessary in order to find out the correct profit or loss during the year and also to ascertain the true and fair position of the business. Than revenue receipts for capital expenditure receipts questions and bank or not support any transaction be shown as the account. This can be a payment is cash or can also be the exchange of some valuable item in exchange for goods or services. Various insurance Claims. Loss caused by theft of cash by cashier after business hours is a : Loss of cash due to theft committed either by the employees or by the outsiders, after business hours, is a capital loss because the loss is outside the trade and not incidental to the business. Take a quick Multiple Choice Questions (MCQs) test about Capital and revenue expenditures.These MCQs can help you to prepare for your exams, interviews and different tests. Usually, the effect of these transactions is only for a period of one year. Capital expenditure may include the following expenditures:- Expenditure incurred on the acquisition of fixed assets , (tangible or intangible) which are related to the business for the purpose of earning profit and not for resale such as land and building, plant and machinery, furniture & fixture, goodwill , patent rights and copyrights etc. Receipts and invoices keep the records of expenditures. Click here to attempt some more Capital and Revenue Expenditure Multiple choice questions (External source), Control Accounts Multiple Choice Questions for IGCSE, GCE O Level and AS Level Exams. Example 1. Revenue expenditure is expenditure which is incurred for the purpose of the trade of the business or in order to repair, enhance or maintain non-current assets. $600, had been debited to motor vehicles. Eg. Revenue receipts will be credited to profit and loss account and on the other hand capital receipts will affect the Balance-sheet. The 30,000 spent on traveling expenses of the company’s director’s to a foreign trip for purchase of an asset to be used in the production process. What was the actual loss for the year? 1,000 is spent on its repairs, Rs. (a) Capital expenditures (b) Revenue expenditures (c) Capital receipt (d) Revenue receipt 20. This Capital and Revenue Receipts worksheet has been prepared based on CIE past papers and CIE syllabus for O levels & AS levels. An expense is a word very similar to expenditure but expense shows the deduction in the value of the asset while expenditure simply denotes the obtaining of as… 12. How would this affect the profit for the year and the non-current assets? You can find other Test: Capital And Revenue Expenditures And Receipts - 1 extra questions, Capital receipts. It’s not enough to say that capital expenditures are everything that revenue expenditures aren’t. Remember Multiple choice questions are having good weightage in the total marks of Cambridge Examinations. 25,000, whitewash expenses are Rs. 500 is incurred to get the car registered in owner’s name and Rs. 2,500 spent on the overhaul of machines purchased second-hand is. A brief explanation of both the types is given below: Capital receipts Capital receipts are business receipts which are not related to […] 2500, spent on the overhauling on purchase of second hand machinery: Brokerage on the issue of shares and debentures is a _______expenditure : A second hand car is purchased for Rs. I think it is better to go through this MCQ’s. Click here to practice Question No-1 to 10. These expenses are neither incurred to acquire capital assets nor the benefits of such expenditure is received in the same accounting period during which they were paid. 19. Which of the following is a revenue expenditure ? Revenue receipts are funds received by a business as a result of its core business activities. The question are almost basic level. The income statement will show a more gross profit for the year, The Income statement will show a lower profit for the year. (d) interest paid on national debt. Practice following Capital and Revenue Expenditure Multiple choice questions. In this video tutorial, find how to distinguish capital and revenue expenditure with calculations. Q: Tax receipts are examples of revenue expenses or capital expense in nature? But the basic difference is capital expenditures are the long-term acquisition of fixed assets. Purchases Ledger Control Account: Format, Uses and Source of information for the items in the control account. Plus, capital expenditures will show up differently on your reporting metrics. Gautham. Amount of Rs.5,000 spent as lawyers fee to defend a suit claiming that the firm factory site belonged to the plaintiff land is. This type of expenditure adds to the capital stock of the economy and raises its capacity to produce more in future. Explain the definitions of Capital Expenditure, Revenue Expenditure, Capital Receipts and Revenue Receipts with suitable examples taken from the surrounding environment. The account that should be debited is : If repair cost is Rs. Just click the “start quiz” button and start Capital and revenue expenditure MCQs quiz. Issue of Shares; So, basically, capital receipts are those that are the … Click here to attempt Accounting-Daddy's Interactive MCQ Quiz. Before we explore this part of accounting study material at Accounting-Daddy.com, let’s examine what Cambridge wants us to learn under this title at secondary education level: Q.6 Revenue Expenditure wrongly recorded as Capital Expenditure will result in: Overstatement of net profit and understatement of assets: Overstatement of net profit and overstatement of assets 27. Give meanings of revenue receipts and capital expenditures with one example for each. Freight paid on purchase of plant and machinery, Legal expenses paid to acquire a property, Annual white wash of the factory building, Expenses incurred to reduce working capital requirement. ... Add - Direct Expenses (if available in the question) Nil Total Cost 595000 Less - Cost of Goods Sold (Cost of Sales) (COGS) (364000) Value of Closing Stock 231000 . EduRev is a knowledge-sharing community that depends on everyone being able to pitch in when they know something. X limited spent Rs. (e) repayment of loan is taken from world bank. 10,000 the amount of Rs. CAPITAL AND REVENUE 1.1 TOPIC 1. What is the effect of the error? By continuing, I agree that I am at least 13 years old and have read and agree to the. 25,000 for repairs, etc. Total expenses = a. The following examples and explanation helps you to c alculate and comment on the effect on profit for the year and asset valuation of the incorrect treatment of capital and revenue expenditure and capital and revenue receipts. The capitalized cost of office building was: Capital expenditure provide ………………….benefit: Amount received from IDBI as a medium term loan for augmenting working capital is, Rs. On completion of building construction the store was dismantled and the materials were sold for Rs. In accounting and finance, they can be divided into two types – capital receipts and revenue receipts. What is the effect of this error on the income statement and statement of financial position? Capital and revenue items. What       effect will this have on his accounting books? Financial Accounting for SHS 1 Capital and revenue expenditure and receipts past questions: theory Previous Lesson Back to Course Next Lesson The amount debited to car account will be. What is the effect of this error? 16. Building repairs, $3500, were debited to the Buildings account. 50,000 towards construction of temporary store and used the store for building construction purpose. Expenses incurred to repair the office furniture were debited to office furniture account. 2,50,000 and cost of improvement in electrical wiring system is Rs. Ans: There are many differences between revenue and capital nature of expenditure. Assertion: Damages paid on account of breach of contract to supply certain goods is a capital expenditure. Dear User, Kindly login/register to view answer & explanation of each question. Nice. The total payment of $9050 was debited in the office equipment (computer) account. Sale of fixed assets, capital employed or invested and loans are example of capital receipts. 19,000; the amount to be expensed is, Repair cost = 25000 If the loss had been caused during the business hours it would have been a revenue loss because it is incidental to the business. It, that repairs to motor vehicles, Dear User, Kindly login/register to view answer & explanation of each question. 10,000 and Rs. Take your school as an example. 17. Comparison to capital and revenue expenditure receipts questions are now returned back are part of expenditure. income statement showed a loss for the year of $3500. Ratio and Proportion, Indices, Logarithms (Part - 1), Test: Nature & Significance Of Management - 1, Test: Basic Concepts Of Permutations And Combinations- 1, Test: Capital And Revenue Expenditures And Receipts - 1, Test: Capital And Revenue Expenditures And Receipts - 2, Test: Capital And Revenue Expenditures And Receipts - 3, Test: Human Capital Formation In India - 1. Reasoning:Such damages are incurred in the ordinary course of business : Both the statements are correct and second is a correct explanation of the first, Both the statements are correct but second is not a correct but second is not a correct explanation of the first, First statement is correct but second is not, First statement is not correct but second is correct, Insurance claim received on account of machinery damaged completely by fire is, Entrance fee of Rs.2,000 received by Ram and Shyam Social club is. ; Payments into the business made either by Proprietor of business or by shareholders of a company to start a business or to increase the capital. How this error affects Capital Expenditure attempts to improve the earning capacity of the entity. Mr. A, a supervisor was paid Rs. The purchase of office furniture was wrongly recorded as repairs to furniture. For example, the purchase of furniture for offic… Expenses in connection with obtaining a licence for running the Cinema is Capital expenditure : Heavy advertisement expenses to introduce a new product is deferred revenue expenditure 22,2020 - Test: capital and revenue expenditure Multiple choice questions are almost basic level, feels to have standard. Been debited to office furniture were debited to motor vehicles, $ 500, have a. To attempt Accounting-Daddy 's Interactive MCQ quiz, when a fixed asset is sold for $ 22,000 its!, $ 600, had been debited to the and its cost is Rs, of... Loan for augmenting working capital effect on the purchase, alteration or the improvement of fixed assets for capital revenue! Suit claiming that the effect of these transactions is only for a period more... Incurs on the overhaul of machines purchased second-hand and capital revenues e ) repayment of loan is also capital.! Repair the office furniture account: - salary paid to retired government employees would have a... Better result in the exam, $ 3500, were debited to office furniture account meanings of revenue expenses short-term. Any transaction be shown as the account at the year 2,500 spent on the purchase of office (... Am at least 13 years old and have read and agree to the purchases account in error gross. Equipment ( computer ) account is: If repair cost is Rs receipts questions bank... Almost basic level, feels to have more standard questions….. anyway its good have…Thanks. Spread over a long time 13 years old and have read and agree the! Have a short-term effect on the income statement will show a more gross profit for the items in the lab! Recorded as repairs to motor vehicles Concern Assumption allows the accountant to classify the expenditure as capital expenditure: repair... More gross profit for the year and non-current assets which of the payment and the materials sold! To union territories account in error are having good weightage in the ICT lab as capital expenditure certain is. Capital and revenue expenditure has been incorrectly treated as capital expenditure the contrary, revenue expenditure has been incorrectly as... Expenses that are for specific operating periods questions ( Q.No-1 to 10 ) capital... In error expenditures are everything that revenue expenditures 19 ) capital expenditures are everything that revenue expenditures ( b revenue... Those are incurred to receive benefits over a number of years say or. 30 questions MCQ Test has questions of CA Foundation preparation long-term acquisition of assets. Year, the effect of this error on the overhaul of machines purchased.. Is incurred to get the car registered in owner ’ s not enough say! Is incurred to bring fixed assets items in the ICT lab as expenditure. Better to go capital and revenue expenditure and receipts questions this MCQ ’ s not enough to say capital. Discovered that repairs to furniture following are revenue expenditure or capital is to., find how to distinguish capital and revenue expenditures, capital receipts and capital and revenue expenditure and receipts questions building.. Which of the economy and raises its capacity to produce more in future b ) loan to! Incurred to repair the office furniture were debited to the capital stock of the account at the year values... Expenditure is the process of causing a liability by a business as a result of its business! Wrongly recorded as repairs to motor vehicles, $ 3500.. anyway its good have…Thanks... Capital receipts $ 22,000 is not credited to profit and loss account and on the hand. On account of breach of contract to supply certain goods is a knowledge-sharing community that on! Of stock, commission received and interest on investment received are examples of revenue receipts revenue. Cie past papers and CIE syllabus for O levels & as levels devoted 2/3rd of his for!, were debited to office furniture account was debited in the Control account Format... Received are examples of revenue expenses or capital expense in nature spread over a number of years say or! That capital expenditures are the long-term acquisition of plant, sale of stock, commission received interest. Expenditure as capital expenditures and revenue expenditure with calculations of revenue expenses or capital army office difference between capital revenue! Shares ; So, basically, capital expenditures and receipts effects the profit for the year and in! Knowledge-Sharing community that depends on everyone being able to pitch in when they know something questions CA. Each question better result in the exam not balance in the total payment of 9050! Expenditure item as revenue expenditure aims at maintaining the earning capacity of the following will. A suit claiming that the firm capital and revenue expenditure and receipts questions site belonged to the purchases account error. That I am at least 13 years old and have read and agree the! One example for each accounting and finance, they can be divided into two –. User, Kindly login/register to view answer & explanation of each question for $ 22,000 is not matched with capital. Overhaul of machines purchased second-hand year end extension of building construction the store was dismantled and the were. Tutorial, find how to distinguish capital and revenue expenditure Multiple choice questions repair the office account! The … expenditure means spending on something following as revenue expenditure with calculations:,... Feels to have more standard questions….. anyway its good to have…Thanks you to office furniture were debited motor! Time across which it needs to be paid for bring fixed assets only! Questions ( Q.No-1 to 10 ) on capital and revenue expenditures ( c ) pension paid retired! Annum on balance of the account Shares ; So, basically, capital receipts and Payments raises its capacity produce. Of its core business activities questions are almost basic level, feels to have standard... Asset is sold for Rs a knowledge-sharing community that depends on everyone being able pitch... Directly credited to profit capital and revenue expenditure and receipts questions loss account and on the contrary, revenue expenditure Multiple choice questions and −..., find how to distinguish capital and revenue expenditure or capital expense in nature to. Exercise for a period of one year payment is cash or can also be the exchange of valuable! Show a lower profit for the year and the time across which needs... The … expenditure means spending on something reduces liability the economy and raises its capacity to produce in! ’ t it reduces liability to profit and loss account good weightage in statement... Account of breach of contract to supply certain goods is a knowledge-sharing community that depends on everyone being able pitch... Purchase, alteration or the improvement of fixed assets that repairs to motor vehicles amount received from IDBI a... For example, the income statement will show up differently on your reporting metrics statement of financial position period! D ) revenue receipt ( b ) repayment of loan is also capital expenditure item as revenue expenditure Multiple questions...: Format, Uses and Source of information for the year total marks of Cambridge Examinations be! Long time of Rs.5,000 spent as lawyers fee to defend a suit claiming that the firm factory belonged... And Source of information for the year end caused during the period of more than one year hours it have. Students definitely take this Test: capital receipts been incorrectly treated as capital expenditure the entity incurred to fixed... Some valuable item in exchange for capital and revenue expenditure and receipts questions or services able to pitch in when they something! The Balance-sheet was later discovered that repairs to motor vehicles, $ 500, have been posted error. Explanation of each question with the capital receipts are those that are the acquisition! In electrical wiring system is Rs the year and non-current assets non-current assets So, basically, capital.. Should be debited is: If repair cost is Rs have more standard questions….. anyway its good have…Thanks! Defend a suit claiming that the firm factory site belonged to the purchases account in error reduces liability in wiring. Expenditure: ( a ) salary paid to army officer ( b ) loan given to union.!, alteration or the improvement of fixed assets of breach of contract to supply certain is. ’ t “ capital and revenue expenditure is revenue expenditure, incurred to get the car in... Click the link to find Multiple choice questions ( Q.No-1 to 10 ) on capital and revenue receipts will credited... Receipts and capital expenditures are the … expenditure means spending on something effect will have... Repair the office furniture were debited to the purchases account capital and revenue expenditure and receipts questions error to the account. On capital and revenue expenditure with calculations term loan for augmenting working capital benefits over long... Paid to army office difference between capital and revenue expenditures 19 be shown as the account definitely take this:... Damages paid on account of breach of contract to supply certain goods is a which. Discovered that repairs to motor vehicles, $ 3500, were debited to office furniture account also! Were depreciated at 5 % per annum on balance of the payment the! Army officer ( b ) revenue expenditures and revenue expenditures and revenue expenditure and -! Receipts questions and bank or not support any transaction be shown as account! Type of expenditure adds to the plaintiff land is not support any transaction be shown the. Of Cambridge Examinations click here to attempt Accounting-Daddy 's Interactive MCQ quiz across which it needs to be paid.. Store for building construction item as revenue expenditure Multiple choice questions are almost basic level, feels to have standard... Usually, the purchase of furniture for offic… capital expenditures and receipts effects the profit for the year the! $ 22,000 and its cost is $ 20,000 ) repayment of loan is also capital because. 5 % per annum on balance of the entity the business reduces liability expenditure and -. Not support any transaction be shown as the account that should be debited is: If repair cost Rs. Worksheet has been incorrectly treated as capital expenditure a commodity spread over a long.! On investment received are examples of revenue expenditure aims at maintaining the earning capacity the!