Multiple choice

Amount spent for replacement of worm out machine parts machine ___ expenditure.

  1. revenue

  2. capital

  3. deferred revenue

  4. deferred capital
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Replacing worn-out (typo: 'worm out') machine parts is routine maintenance to keep the asset functioning. This expenditure doesn't add new capacity or significantly extend the asset's life - it merely maintains existing working condition. Such maintenance and replacement expenses that preserve current earning capacity are revenue expenditures, charged to the profit and loss account of the relevant period.

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