PRC-1 · Chapter 1 · Question 58 of 100
'Rapid Logistics' spent Rs. 150,000 on major structural alterations to their delivery vans, which permanently increased their payload capacity by 20%. How should this expenditure be classified?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) Capital expenditure
Explanation
Expenditures that improve a non-current asset beyond its originally assessed standard of performance, such as increasing carrying capacity, are classified as capital expenditures.
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