Question

Which of the following is not true about Capital Expenditure?

• A. Creates future benefits
• B. Incurred to acquire fixed assets
• C. Incurred to increase the economic life of existing fixed assets.
• D. Reduces the profit of the concern.

Hint:

Capital expenditure creates future benefits and is recorded as an asset rather than an expense.

Answer 1

The Correct Option is D

Capital expenditure refers to funds used to acquire or upgrade physical assets like buildings or equipment. It creates long-term benefits and is capitalized as an asset. It does not reduce the profit of the concern in the year it is incurred, as it is not treated as an expense but as an investment.