Capital and Revenue Expenditure
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What are the three pillars for classifying expenditure as capital or revenue?
Nature of expense, effect on revenue-earning capacity, duration of benefit.
Define capital expenditure with its primary characteristic.
Expense providing long-term benefit, creates fixed asset, shown in Balance Sheet.
What is revenue expenditure? State its lifespan.
Benefit not available beyond 12 months, recurring, fully charged to P&L.
What is deferred revenue expenditure (DRE)? Why is it called fictitious?
Revenue expense with multi-period benefit; fictitious because no realisable value exists.
Name three examples of deferred revenue expenditure.
Heavy advertisement campaigns, preliminary expenses, discount on debenture issue.
Under Schedule II Companies Act 2013, how is capital expenditure charged to P&L?
Through depreciation spread over useful life, not in full in year of incurrence.
State the tax treatment of revenue expenditure under Section 37(1) Income Tax Act.
Fully tax-deductible if wholly and exclusively for business purposes.
What is a capital receipt? Give one banking example.
Receipt not from day-to-day operations; e.g., proceeds from equity share issue.
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