Chapter Exam

Chapter 11: Capital and Revenue Transactions — Online MCQ Test

Q: Which of the following is considered a capital expenditure?

Answer: A. Purchase of machinery — Expenditure incurred to acquire fixed assets or increase their earning capacity is treated as capital expenditure.

Q: Which of the following is an example of revenue expenditure?

Answer: C. Repairs and maintenance of machinery — Revenue expenditure is incurred for day-to-day operations and maintaining the existing asset.

Q: Expenditure incurred on the installation of a new machine is treated as:

Answer: B. Capital expenditure — Any expense incurred until the asset is put to use is considered part of the cost of the asset.

Q: If an accountant mistakenly records a capital expenditure as a revenue expenditure, what is the impact on financial statements?

Answer: C. Profit is understated — Charging a capital item to the Profit and Loss account instead of capitalizing it reduces the net profit for the year.

Q: A business purchased a new machine for ₹1,00,000, paid ₹5,000 as freight and ₹2,000 for installation. The amount to be capitalized is:

Answer: C. ₹1,07,000 — All costs incurred to bring an asset to its working condition (purchase price + freight + installation) are capitalized.

ACCOUNTANCY · CLASS 11th · Tamil Nadu State Board

Practice Chapter 11: Capital and Revenue Transactions with a free chapter-wise online MCQ test for Tamil Nadu State Board CLASS 11th ACCOUNTANCY. This chapter covers: This chapter details distinctions between capital expenditure revenue expenditure deferred revenue expenditure capital receipts and revenue receipts. Students analyze financial sta.... AI-generated questions from basic to board-exam level, with instant results and explanations.

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Chapter 11: Capital and Revenue Transactions — Important Questions & Answers (FAQ)

Frequently asked questions from Tamil Nadu State Board CLASS 11th ACCOUNTANCY — Chapter 11: Capital and Revenue Transactions, with answers and explanations. These are sample questions; the exam has its own separate question set.

Which of the following is considered a capital expenditure?

A. Purchase of machinery ✓
B. Payment of monthly rent
C. Salary paid to employees
D. Purchase of raw materials

Answer: A. Purchase of machinery
Expenditure incurred to acquire fixed assets or increase their earning capacity is treated as capital expenditure.

Which of the following is an example of revenue expenditure?

A. Cost of building an extension to a factory
B. Legal charges incurred to acquire a property
C. Repairs and maintenance of machinery ✓
D. Amount spent on installation of a new plant

Answer: C. Repairs and maintenance of machinery
Revenue expenditure is incurred for day-to-day operations and maintaining the existing asset.

Expenditure incurred on the installation of a new machine is treated as:

A. Revenue expenditure
B. Capital expenditure ✓
C. Deferred revenue expenditure
D. Operating expense

Answer: B. Capital expenditure
Any expense incurred until the asset is put to use is considered part of the cost of the asset.

If an accountant mistakenly records a capital expenditure as a revenue expenditure, what is the impact on financial statements?

A. Profit is overstated
B. Assets are overstated
C. Profit is understated ✓
D. Capital is overstated

Answer: C. Profit is understated
Charging a capital item to the Profit and Loss account instead of capitalizing it reduces the net profit for the year.

A business purchased a new machine for ₹1,00,000, paid ₹5,000 as freight and ₹2,000 for installation. The amount to be capitalized is: