3 Marks Question

Question 13 Marks

Explain the following with examples:
i. Capital Expenditure
ii. Revenue Expenditure
iii. Deferred Revenue Expenditure

Answer

i. Capital Expenditure: If benefit of expenditure is received for more than one year, it is called capital expenditure. Example: Purchase of Machinery.
ii. Revenue Expenditure: It is the amount spent to purchase goods and services that are used during an accounting period for normal operations of busiess is called revenue expenditure. For Example: Rent, interest, etc.
iii. Deferred Revenue Expenditure: There are certain expenditures which are revenue in nature but benefit of which is derived over number of years. For Example: Huge Advertisement Expenditure.

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Question 23 Marks

The Swati Industries removed their works to a more suitable premises:
i. A sum of ₹ 4,750 was spent on dismantling, removing and re-installing Plant,Machinery and Fixtures.
ii. The removal of Stock from the old Works to the new one cost ₹ 500.
iii. Plant and Machinery which stood in the books at ₹ 75,000 included a machine at a book value of ₹ 1,700. This being obsolete was sold off at ₹ 450 and was replaced by a new machine which cost ₹ 2,400.
iv. The freight and cartage on the new machine amounted to ₹ 150 and the erection charges cost ₹ 275.
v. The Fixtures and Furniture appeared in the books at ₹ 7,500. Of these, some portion of the book value of ₹ 1,500 was discarded and sold off for ₹ 1,600 and new Furniture of the value of ₹ 4,200 was acquired.
vi. A sum of ₹ 1,100 was spent on painting the new factory; and ₹ 400 on next Diwali.
State which item of expenditure would be charged to capital and which to revenue.

Answer

Revenue Expenditure:-
(a) Deferred Revenue expenditure.
(b) Deferred Revenue expenditure.
(f) ₹ 400 is Revenue expenditure.
Capital Expenditure:-
(c) ₹ 1,250 is Capital loss and ₹ 2,400 is capital expenditure.
(d) Capital expenditure.
(e) ₹ 100 is Capital profit and ₹ 4,200 is Capital expenditure.
(f) ₹ 1,100 is Capital expenditure.

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Question 33 Marks

Calculate Net Sales and G.P. from the following: Cost of Goods Sold ₹ 4,50,000, G.P. 25% on Sales.

Answer

Gross Profit $=25 \%$ on sales
$\frac{1}{4}$ th on sales $=\frac{1}{3}$ th on Cost
Calculation of Gross Profit:
=₹$4,50,000 \times \frac{1}{3}$
Gross Profit =₹ $1,50,000$
Calculation of Sales:
cost of goods sold $=$ Sales + Gross Profit
Sales $=$ cost of goods sold + Gross Profit
Sales =₹$ \cdot 4,50,000+$₹ 1,50,000=₹ 6,00,000

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