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11th Accountancy Monthly Test - 2 ( Capital and Revenue transactions )

MABS Institution

11th Accountancy Monthly Test - 2 ( Capital and Revenue transactions )-Aug 2020

Time : 2.30 Hours

Part - A

Multiple Choice Question - Answer All Question

Subsidy of Rs.40,000 received from the government for working capital by a manufacturing concern is __________

Capital receipt
Revenue receipt
Capital expenditure
Revenue receipt

The 'receipt' which is invested in the business for a long time is ____________

Capital receipt
Revenue receipt
Investment receipt
None of these

Deferred revenue expenditure is to be written off ___________

In the year in which the expenses are incurred
In the year in which the benefit of expenses are exhausted
Within 3 to 5 years
Within 5 to 10 years

Revenue expenditure is intended to benefit ____________

Subsequent year
Previous year
Current year
None of these

Excess of revenue receipts over revenue expenditure is ____________

Net receipt
Net loss
Net profit
Capital profit

Insurance claim received on account of machinery damaged completely by fire is ____________

Revenue receipt
Revenue expenditures
Capital receipt
Capital expenditures

Expenditure incurred Rs.20,000 for trial run of a newly installed machinery will be

Preliminary expense
Revenue expenditure
Capital expenditure
Deferred revenue expenditure

A plant worth Rs.8,000 is sold for Rs.8,500 the capital receipt amounts to __________

Rs.8,000
Rs.8,500
Rs.500
Rs.16,500

___________ items are to be shown in the Balance sheet.

Capital
Expense
Revenue
Loss

Expenses on advertisement will be classified under _________

Capital expenditure
Revenue expenditure
Deferred revenue expenditure
Capital receipt

Transaction which provide benefit to the business for more than one year is called as ___________

Capital transaction
Revenue transaction
Neither of the two
None of these

Part - B

Generic 2 - Answer All Question

State the nature of the following transactions:
i) Carriage paid on goods purchased.
ii) Legal expenses incurred for abuse of trade mark.
iii) Money raised by issue of equity shares.

What is capital expenditure?

What is revenue receipts? Give any two examples.

What are the features of deferred revenue expenditure?

Classify the following expenditures and receipts as capital or revenue:
i) Rs.10,000 spent as travelling expenses of the directors on trips abroad for the purchase of fixed assets.
ii) Amount received from trade receivables during the year.
iii) Amount spent on demolition of building to construct a large building on the same site.
iv) Insurance claim received on account of a machinery damaged by fire.

State the nature of the following transactions.
i) Expenditure incurred on issue of equity shares.
ii) Cost of formation of anew company.
iii) Cost of Rs.10,000 incurred in increasing the sitting accommodation and Rs.5,000 in repainting of cinema house.

What is Capital profits?

Part - C

Generic 3 - Answer All Question

Write any three examples of revenue expenditure.

What are the classifications of expenditures?

What is deferred revenue expenditure? Give two examples.

Distinguish between capital expenditure and revenue expenditure.

Distinguish between capital receipt and revenue receipt.

Part - D

Generic 5 - Answer All Question

Classify the following items into capital and revenue.
i) Rs.50,000 spent for railway siding.
ii) Loss on sale of old furniture.
iii) Carriage paid on goods sold.

Classify the following receipts under capital and revenue.
i) Rs.3,00,000 worth of debentures are issued for raising loan.
ii) Rs.5,000 received as dividend from the investment on shares.
iii) Gokul started business with Rs.4,00,000.
iv) A machinery costing Rs.50,000 was sold for Rs.50,000.
v) Creditors allowed discount Rs.30,000.

State whether the following are capital, revenue and deferred revenue.
i) Legal fees paid to the lawyer for acquiring a land Rs.20,000.
ii) Heavy advertising cost of Rs.12,00,000 spent on introducing a new product.
iii) Renewal of factory licence Rs.12,000.
iv) A sum of Rs.4,000 was spent on painting the factory.

Kumar gives you the following expenses which were incurred in his business during the year 2003, classify them into capital, revenue or deferred revenue.
i) Rs.12,000 spent on purchasing a patent right.
ii) Freight charges paid on new plant amounts to Rs.700
iii) Repairs of Rs.600 for furniture.
iv) Rs.10,000 spent towards expenses connected with rainwater harvesting as per Government orders.
v) Rs.7,500 spent towards initial advertising expenses.

Classify the following expenditure under capital and revenue.
i) Rs.2,500 spent on purchasing a tyre for a car.
ii) Rs.2,00,000 spent on remodeling a building.
iii) Trademark of the business is registered at Rs.50,000.
iv) Rs.5,00,000 worth goods purchased for the purpose of sale.
v) Machinery was depreciated by Rs.10,000.

Classify the following into capital and revenue.
i) Rs.560 spent on replacement of a worn our part of plant.
ii) Rs.1,500 spent on complete overhauling of a second hand machinery just bought.
iii) Carriage expenses Rs.230.
iv) Profit on sale of asset Rs.700
v) Rs.150 loss on sale of furniture.

Explain the basic considerations in determining the difference between capital and revenue expenditure.

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