Accounting for IGCSE & O level - Accounting Procedures (Section 20 - No. 26)
A company buys a new machine, and pays for its installation. How should these costs be treated?
The machine cost is revenue expenditure; installation is capital expenditure.
Both are revenue expenditures.
Both are capital expenditures.
The machine is capital expenditure; installation is a period cost.
Explanation
The purchase and installation increase the asset's value, hence capital expenditures.
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