Capital and Revenue Expenditure Multiple Choice Questions

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Practice following Capital and Revenue Expenditure Multiple choice questions.

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Capital and Revenue Expenditure Multiple Choice Questions contd.......

11. Which of the following are revenue expenditure for an office equipment dealer?

  1. sales promotion costs
  2. warehouse extension costs
  3. purchase of office equipment for resale
  4. purchase of delivery vehicle for sales department

A.

1 and 2

B.

1 and 3

C.

2 and 4

D.

3 and 4


12. The purchase of office furniture was wrongly recorded as repairs to furniture. What is the effect of this error?

A.

gross profit is overstated

B.

profit for the year is understated

C.

non-current assets are overstated

D.

current assets are understated


13. A retail trader treated a capital expenditure item as revenue expenditure. What       effect will this have on his accounting books?

A.

Assets and Liabilities totals will not balance in the statement of financial position.

B.

The trial balance will not balance

C.

The income statement will show a more gross profit for the year

D.

The Income statement will show a lower profit for the year


14.David’s income statement showed a loss for the year of $3500. It was later discovered that repairs to motor vehicles, $600, had been debited to motor vehicles. What was the actual loss for the year? 

A.

$4700

B.

$2300

C.

$4100                

D.

$2900


15. A Computer system cost $9050. The price included $50 for cartridge refill. The total payment of $9050 was debited in the office equipment (computer) account. What is the effect of this error on the income statement and statement of financial position?

# Profit for the year Non-current assets
A. overstated by $50 overstated by $50
B. overstated by $50 understated by $50
C. understated by $50 overstated by $50
D. understated by $50 understated by $50

16. An item of revenue expenditure has been incorrectly treated as capital expenditure.  What is the effect of this error?

# Non-current Assets Profit for the year
A. Understated Overstated
B. Understated Understated
C. Overstated Overstated
D. Overstated Understated

17. Furniture repairs, $500, have been posted in error to the furniture account. What is the effect on the financial statements?

# Profit for the year Non-current assets
A. Understated Overstated
B. Overstated Understated
C. Understated Understated
D. Overstated Overstated

18. Building repairs, $3500, were debited to the Buildings account. Buildings were depreciated at 5% per annum on balance of the account at the year end.  What is the effect of the error?

# effect on profit for the year effect on non-current asset
A. Overstated $3500 Overstated $3500
B. Overstated $3325 Overstated $3325
C. Understated $3500 Understated $3500
D. Understated $3325 Understated $3325

19. The cost of office equipment was debited to the purchases account in error. How this error affects the profit for the year and non-current assets?

# Profit for the year Non-current assets
A. Overstated Overstated
B. Understated Understated
C. Understated Overstated
D. Overstated Understated

20. Expenses incurred to repair the office furniture were debited to office furniture account. How would this affect the profit for the year and the non-current assets?


#
Profit for the year Non-current assets
Understated Overstated Understated Overstated
A. Yes Yes
B. Yes Yes
C. Yes Yes
D. Yes Yes

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Multiple-Choice Questions Answer Key:

Q.No Answer Q.No Answer
1. D 11. B
2. A 12. B
3. B 13. D
4. B 14. C
5. D 15. A
6. C 16. C
7. C 17. D
8. B 18. B
9. C 19. B
10. C 20. B

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