Differentiating between capital and revenue expenditure for a firm
Question
With reference to the expenditure made by an organisation or a company, which of the following statements is/are correct? Select the correct answer using the code given below:
- 1.
Acquiring new technology is capital expenditure.
- 2.
Debt financing is considered capital expenditure, while equity financing is considered revenue expenditure.
Options
1 only
2 only
Both 1 and 2
Neither 1 nor 2
Explanation
Statement 1 is correct; acquiring new technology creates a long-term asset and future economic value, making it a classic capital expenditure (CapEx). Statement 2 is incorrect; debt and equity financing are methods of raising capital (financing activities), not categories of operational spending (expenditure) like capital or revenue.
Answer: (a).
Question details
Year
2022
Paper
GS Paper 1
Question
Q9
Subject
Economy
Sub-topic
Industry, MSME & Services
Type
Statement-based
Difficulty
Medium
Nature
Static
Source hint
NCERT Economy Cl.12 Ch.5
Same sub-topic — other years
Industry, MSME & Services has appeared in multiple papers:
See all questions on Industry, MSME & Services
Browse every tagged question across all years