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Bridge Course Unit 1 Assignment

This document provides a sample exam for a course on fundamentals of financial accounting. It contains multiple choice and short answer questions about classifying different types of business transactions as either capital expenditures, revenue expenditures, or deferred revenue. Some examples of capital expenditures included lease premiums, expenditures to restore assets, and interest charged on financing new equipment. Revenue expenditures included expenses for maintenance, utilities, and employee salaries. Questions also addressed classifying specific transactions like machinery purchases, repairs, and government grants. The exam is assessing students' understanding of distinguishing between capital vs revenue accounting classifications.

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Srinidhi Srinivasan
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71 views2 pages

Bridge Course Unit 1 Assignment

This document provides a sample exam for a course on fundamentals of financial accounting. It contains multiple choice and short answer questions about classifying different types of business transactions as either capital expenditures, revenue expenditures, or deferred revenue. Some examples of capital expenditures included lease premiums, expenditures to restore assets, and interest charged on financing new equipment. Revenue expenditures included expenses for maintenance, utilities, and employee salaries. Questions also addressed classifying specific transactions like machinery purchases, repairs, and government grants. The exam is assessing students' understanding of distinguishing between capital vs revenue accounting classifications.

Uploaded by

Srinidhi Srinivasan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

BRIDGE COURSE 2023-2024

FUNDAMENTALS OF FINANCIAL ACCOUNTING


UNIT I
CAPITAL AND REVENUE EXPENDITURE

Q.1. Identify and classify the following into Capital and Revenue expenditure
a) Lease Premium
b) Preliminary Expenses
c) Expenditure on restoration of asset
d) Expenses paid for maintenances of machinery
e) Charges paid for installing software upgrades in computers
f) Interest charged on financing new equipment for expansion of business
g) Expenses paid for utilities and telecoms
h) Commission and Salaries paid to employees
Q.2. Identify each transaction into Capital, Revenue or Deferred Revenue expenditure,
stating the reason for each transaction:
a) Carriage of ₹ 1,000 spent on machinery purchased and installed.
b) Office rent paid ₹ 2,000.
c) Wages of ₹ 5,000 paid to machine operators.
d) Hire charges for the use of motor vehicle, hired for five years, but paid yearly.
e) The sum of ₹ 3,200 has been spent on a machine as follows:
i. ₹ 2,000 for additions to double the output.
ii. ₹1,200 for repairs necessitated by negligence.

Q.3. State with reasons whether the following are Capital, Revenue or Deferred Revenue
expenditure:
a) Expenses incurred in connection with obtaining a licence for starting the factory for ₹ 25,000.
b) A factory shed was constructed at a cost of ₹ 2, 00,000. A sum of ₹10,000 had been incurred
in the construction of temporary huts for storing building material.
c) Overhaul expenses of second-hand machinery purchased amounted to ₹ 5,000.
d) Advertisement expenses amounted to ₹ 10, 00, 00, 000 to introduce a new product.
e) Expenses on freight for purchasing new machinery.
f) Freight and insurance on the new machinery and cartage paid to bring the new machinery to
the factory.
Q.4. Classify the following into Capital and Revenue expenditure, stating reasons in each
case:
a) ₹ 5,000 received from a customer whose account was previously written off as bad.
b) ₹ 20,000 received from the sale of an old machine.
c) ₹ 2, 60,000 received from the sale of stock-in-trade.
d) ₹ 5, 00,000 is contributed by a partner as capital.
e) Took a loan of ₹ 10 Lac from Punjab National Bank.
f) Received ₹ 4 Lac as subsidy from State Government.
g) Received ₹ 8, 00, 000 as a grant from State Government for the construction of quarters for
the staff.
Q.5. State with reasons whether the following are Capital or Revenue expenditure:
a) Expenditure incurred to bring the fixed assets to the place of their use.
b) Major repairs and replacement of plant which increase the efficiency of the plant.
c) Expenditure incurred to maintain the existing efficiency or the earning capacity
d) The cost of shifting a plant to another place
e) Expenditure incurred for maintaining fixed assets
f) Interest on loan taken after commencement of commercial production

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