Interest on loan taken for the purchase of fixed assets is a :
Capital Expenditure
Capital expenditure is expenditure incurred to acquire a fixed asset or to bring it into a usable condition; it includes all costs necessary to put the asset to use.
Interest on a loan taken specifically to purchase a fixed asset, incurred up to the date the asset is ready for use, is a borrowing cost directly attributable to acquiring that asset, so it is added to (capitalised in) the cost of the asset.
Revenue expenditure relates to day-to-day running of the business; deferred revenue expenditure is a heavy revenue outlay spread over several years (such as heavy advertising); a capital loss arises on the sale of a capital asset. None of these describes this interest.
Therefore, such interest is treated as capital expenditure.
Hence, the answer is Capital Expenditure.
Similar Questions
Subsequent expenditures that extend the useful life, improve the quality of output, or reduce operating costs of an existing asset beyond their originally estimated levels are
Important Questions from Types of Expenditure
- During the year 2012 - 13, which one of the following was the largest item of expenditure of the central government ?
Which of the following statements is NOT true regarding capital expenditure(s)?
Which of the following statements is NOT true regarding capital expenditure(s)?
- Which of the following item of expenditure is not a part of the plan expenditure ?
Which one of the following statements is not true ?
