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
Capital expenditures
Spending on an asset after it has been acquired is capitalised only when it increases the future benefits from the asset beyond its originally assessed standard of performance, as AS 10 (Accounting for Fixed Assets) required.
Extending useful life, improving the quality of output or reducing operating costs are all such improvements (betterments), so the amount is added to the asset's cost and depreciated over its remaining life. That is capital expenditure.
Revenue expenditure only maintains the asset at its existing level, such as routine repairs and servicing, and is charged to the profit and loss account of the year.
Deferred revenue expenditure is a heavy revenue outlay whose benefit spreads over a few years, such as a big advertising campaign; it does not improve a particular asset.
Hence, Capital expenditures.
Similar Questions
Interest on loan taken for the purchase of fixed assets is a :
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 ?
