Capital Expenditure - SS3 Accounting Past Questions and Answers - page 1
What are capital expenditures in accounting?
Expenses incurred to acquire or improve long-term assets
Expenses that vary with the level of production or sales
Expenses that remain the same regardless of the level of production or sales
Expenses that are not related to the normal course of business
What is the purpose of depreciating long-term assets?
To allocate the cost of the asset over its useful life
To record the expense immediately
To increase the value of the asset
To decrease the value of the asset
Which of the following is an example of capital expenditure?
Purchase of office supplies
Payment of salaries
Purchase of a new manufacturing facility
Advertising expenses
Why are capital expenditures important for a company's growth?
They improve productivity and efficiency
They increase revenue
They reduce expenses
They are not important for growth
What is the difference between revenue and capital expenditures?
Revenue expenditures are expensed immediately, while capital expenditures are depreciated over their useful life
Revenue expenditures are related to long-term assets, while capital expenditures are related to short-term assets
Revenue expenditures are optional, while capital expenditures are mandatory
Revenue expenditures are not recorded in the accounting system, while capital expenditures are recorded in the accounting system
How do companies decide whether to make a capital expenditure?
Companies typically evaluate the potential benefits and costs of a capital expenditure, including the expected return on investment, the impact on cash flow and profitability, and the company's overall financial position and strategic goals.
What is the impact of capital expenditures on a company's financial statements?
Capital expenditures are recorded on a company's balance sheet as an asset and are depreciated over their useful life. This reduces the asset's value over time and increases the company's expenses, which can impact its profitability and cash flow.