Assignment 2

A. What is meant by capital expenditure, and revenue expenditure?

B. Some of the following items should be treated as capital and some as revenue. For each of

them, state which classification applies. Note that in the case where a transaction has both

capital and revenue elements, they should be shown separately.

1. The purchase of machinery for use in the business.

2. Carriage paid to bring the machinery in (1) above to the works.

3. Complete redecoration of the premises at a cost of 1,500.

4. A quarterly account for heating.

5. The purchase of a soft drinks vending machine for the canteen with a stock of soft

drinks.

6. Wages paid by a building contractor to his own workmen for the erection of an office

in the builders stockyard.

7. Purchase of a new van.

8. Purchase of replacement engine for existing van.

9. Cost of altering interior of new van to increase carrying capacity.

10. Cost of motor tax for new van.

11. Cost of motor tax for existing van.

12. Cost of painting businesss name on new van.

13. Repair and maintenance of existing van.

14. Break-down van purchased by a garage.

15. Repairs to a fritterers van.

16. The cost of installing a new machine.

17. Cost of hiring refrigeration plant in a butchers shop.

18. Twelve dozen sets of cutlery, purchased by a catering firm for a new dining-room.

19. A motor vehicle bought for re-sale by a motor dealer.

20. The cost of acquiring patent rights.

21. The cost of repairs and an extension to the premises.

22. Installation of a gas central heating boiler in place of an oil-fired central heating

boiler.

23. Small but expensive alterations to a cigarette manufacturing machine which increased

the machines output by 20%.

24. Cost of building extension to factory.

25. Purchase of extra filing cabinets for sales office.

26. Cost of repairs to accounting machine.

27. Cost of installing reconditioned engine in delivery van.

28. Legal fees paid in connection with factory extension. Review questions

29. Purchase of extra milling machine (includes 300 for repair of an old machine) 2,900

30. Rent 750

31. Electrical expenses (includes new wiring 600, part of premises improvement) 3,280

32. Carriage inwards (includes 150 carriage on new cement mixer) 1,260

33. Purchase of extra drilling machine 4,100

34. Purchase of an extra van.

35. Cost of rebuilding warehouse wall which had fallen down.

36. Painting extension to warehouse when it is first built.

37. Repainting extension to warehouse three years later than that done in (35).

38. Carriage costs on bricks for new warehouse extension.

39. Carriage costs on purchases.

40. Carriage costs on sales.

41. Legal costs of collecting debts.

42. Legal charges on acquiring new premises for office.

43. Fire insurance premium.

44. Costs of erecting new machine.

45. Repairs to meat slicer.

46. New tyre for van.

47. Additional shop counter.

48. Renewing signwriting on shop.

49. Fitting partitions in shop.

50. Roof repairs.

51. Installing thief detection equipment.

52. Wages of shop assistant.

53. Carriage on returns outwards.

54. New cash register.

55. Repairs to office safe.

56. Installing extra toilet.

C. Outline five (5) objectives the IASBs conceptual framework of accounting seeks to
achieve.