Q9.
With reference to the expenditure made by an organisation or a company, which of the following statements is/are correct? 1. Acquiring new technology is capital expenditure. 2. Debt financing is considered capital expenditure, while equity financing is considered revenue expenditure. Select the correct answer using the code given below:
Answer
A
Explanation
Statement 1 is correct: Costs to upgrade or purchase software and invest in new technology are considered capital expenditure (CapEx), as they improve operational efficiency and increase revenue in the long term. Statement 2 is incorrect: Both debt financing and equity financing are considered part of capital receipts for the company, not capital vs. revenue expenditure. Capital receipts are receipts that create liabilities or reduce financial assets.