Q.Classify the following items as Capital Expenditure or Revenue Expenditure:

Classification exercises like this test whether you can apply the capital-vs-revenue distinction to real, everyday business items rather than just recite the definitions.

Each item is classified by asking: does this expenditure create/add to a fixed asset with a benefit lasting several years (Capital Expenditure), or does it merely keep the business running day-to-day, with its benefit exhausted in the current year (Revenue Expenditure)?

1. Purchase of a delivery van — Capital Expenditure. Acquires a new fixed asset that will be used over several years.
2. Wages paid to factory workers — Revenue Expenditure. A recurring, day-to-day cost of running operations, benefit exhausted immediately.
3. Cost of erecting a new machine — Capital Expenditure. Installation/erection cost is added to the cost of the asset itself, since the machine cannot be put to use without it — the whole cost (purchase + erection) benefits several years.
4. Repairs to an existing building — Revenue Expenditure. Merely maintains the building in its existing working condition; it does not create a new asset or extend the building's life beyond what it would otherwise have had. …

A quick test to apply to each item: "does this expenditure bring a NEW asset into existence, or add to the cost of putting a new asset into working condition (erection, carriage, installation)?" If yes → Capital Expen …

Students often wrongly treat carriage and erection charges on a NEW asset as revenue expenditure just because they look like routine payments — any cost necessary to bring a new asset to its place of use and put it into working …