Multiple choice

Rs. 5, 000 spent on the overhaul of machines purchased second hand is

  1. capital expenditure

  2. revenue expenditure

  3. deferred revenue expenditure

  4. none of the above
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A Correct answer
Explanation

Spending Rs. 5,000 on overhauling second-hand machines makes them operational and fit for use. This expenditure adds to the asset's value and provides benefits over multiple years, not just the current accounting period. Such expenditures that bring an asset to working condition or enhance its capabilities are capital expenditures, not revenue expenditures which merely maintain existing capacity.

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