Question

Which of the following statements is NOT true regarding capital expenditure(s)?
1. Capital expenditure is transferred to trading and profit and loss account.
2. Capital expenditures are spread over more than one accounting period.
3. Capital expenditure benefits more than one accounting year.
4. Capital expenditure is incurred to acquire fixed assets for operation of business.

Answer 1

Correct Answer - Option 1 : Capital expenditure is transferred to trading and profit and loss account.

The Correct Answer is Capital expenditure is transferred to trading and profit and loss account.

• Capital expenditures (CapEx) are the funds that are used by a company to acquire, upgrade, and maintain physical assets such as property, plants, buildings, technology, or equipment.
• Capital expenditures are often used to undertake new projects or investments by a company. 
• This Capex financial outlay is made by companies for increasing the scope of their operations or for adding some economic benefit to the operation.
• They can be spread over for more than one accounting period or year.
• They are incurred to acquire fixed assets for the operation of the business.

• The capital expenditure must not be confused with operating expenses (OpEx).
• Operating expenses are the shorter-term expenses that are required to meet the ongoing operational costs of running a business.
• Unlike Capex, operating expenses are fully deducted from the company's taxes in the same year in which the expenses occur.