CBSE Class 11 Accountancy Revision Worksheet Set 04

Classify the following into capital and revenue:

Question 1. Wages paid to workers for setting up new machinery
Answer: Capital Expenditure.
In simple words: Any expense incurred to bring a fixed asset into working condition is treated as part of the asset cost and is classified as capital expenditure.

Exam Tip: Installation wages and setup costs for new machinery are capitalized because they enhance the long-term operational capacity of the asset, rather than benefiting only the current accounting period.

Question 2. Carriage on new machinery
Answer: Capital Expenditure.
In simple words: Transport and carriage charges paid to bring a newly purchased asset to the business premises are added to the cost of the asset.

Exam Tip: Remember that all incidental expenses up to the point the asset is put into use (like freight, carriage, transit insurance, and import duty) are capital expenditures.

Question 3. Advertisement expenditure in special advertisement drive.
Answer: Deferred Revenue Expenditure (or Heavy Revenue Expenditure).
In simple words: Heavy expenditure on special advertising campaigns whose benefits extend beyond the current accounting year is treated as deferred revenue expenditure.

Exam Tip: While normal routine advertising is treated as standard revenue expenditure, a special or massive promotional campaign creates long-term intangible benefits and is written off over several years.