Question
With reference to the expenditure made by an organisation or a company, which of the following statements is/are correct ?
1. Acquiring new technology is capital expenditure.
2. Debt financing is considered capital expenditure, while equity financing is considered revenue expenditure.
Select the correct answer using the code given below :
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Answer:
A
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Explanation:
Statement 1 is correct: Capital expenditures deals with creation for acquisition of tangible or non-tangible assets new technology is a non-tangible asset.
Statement 2 is wrong: Equity financial is not revenue expenditure. It is also a capital expenditure.