Note: We encourage you to attempt this with complete conscience within a 30 minutes time frame. Please feel free to refer to the ICAI Material and TowardsCA study notes before attempting the same. You can e-mail your answers to towardsca@gmail.com for verification.
Direct Questions:
- Define “Capital Expenditures” and provide two examples of such expenditures.
- Explain the difference between capital expenditures and revenue expenditures in financial accounting.
- Define “Revenue Expenditures” and give two examples of such expenditures.
- What is the purpose of tracking receipts in financial accounting, and how are they classified?
- How do receipts impact a company’s financial statements, specifically the income statement and cash flow statement?
Practical Questions:
- ABC Ltd. purchased a new building for INR 1,00,00,000. Determine whether this expenditure qualifies as a capital expenditure or a revenue expenditure, and explain the reasoning behind your decision.
- DEF Company incurred INR 5,00,000 on repairs and maintenance of its machinery during the financial year. Classify this expenditure as a capital or revenue expenditure, and discuss the implications for DEF Company’s financial statements.
- XYZ Corporation received INR 2,00,000 as interest income on its investments. Explain how this receipt should be recorded in XYZ Corporation’s books, and analyze its impact on the income statement and cash flow statement.
- LMN Ltd. invested INR 50,00,000 in research and development activities. Determine whether this expenditure should be treated as a capital or revenue expenditure, and discuss the potential long-term benefits for LMN Ltd.’s competitiveness and profitability.
- PQR Enterprises sold an old delivery van for INR 3,00,000. Analyze the treatment of this receipt in PQR Enterprises’ books, and assess its impact on the company’s cash flow statement and overall financial position.