Theoretical FrameworkQuestion 4629 of 110

Amount spent for the construction of temporary huts, which were necessary for construction of the Cinema House and were demolished when the Cinema House was ready, is capital expenditure. [May 2019, 2 Marks]

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Detailed Solution & Explanation

True: Amount spent for the construction or acquisition of a capital asset (here, Cinema house), in whatever form, will be treated as Capital Expenditure.

About This Chapter: Theoretical Framework

Paper

Paper 1: Accounting

Weightage

5-10%

Key Topics

Policies, Standards (Ind AS), Vocabulary

This chapter covers Policies, Standards (Ind AS), Vocabulary and is part of Paper 1: Accounting in the CA Foundation exam.

View Official ICAI Syllabus

Exam Strategy Tip

This topic carries 5-10% weightage. Focus on understanding core concepts rather than memorizing.

Key Concepts to Understand

Capital Expenditure

Expenditure incurred to acquire, improve, or extend the life of a fixed asset that provides benefit over more than one accounting period. It is shown as an asset in the Balance Sheet.

Revenue Expenditure

Expenditure incurred in the normal course of business operations whose benefit is consumed within the same accounting period. It is charged to the Profit & Loss Account.

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