Back to Questions
SSC Financial and Cost Accounting P-1 QUESTION #6052
Question 1

Which one of the following qualifies as a capital expenditure?

  • Paying for renovations that upgrade and improve a building✔️
  • Paying carriage-outward charges related to delivering sold goods
  • Paying legal fees to recover outstanding amounts from customers
  • Paying performance bonuses to production workers
Correct Answer Explanation

Capital expenditure is spending that improves, extends the life of, or adds value to a long-term asset. Renovating and upgrading a building increases its value and useful life — this is capital expenditure. The other options are all revenue expenditures: carriage outwards, legal recovery fees, and wage bonuses are period costs that appear on the income statement and do not create lasting assets.