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 :
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Answer: A. Statement 1 is correct: buying new technology creates a long-term asset, so it is capital expenditure. Statement 2 is wrong: debt and equity financing are ways of raising money, not types of spending at all, so they are neither capital nor revenue expenditure. So 1 only.
Watch for: Students mix up the source of funds (debt or equity) with how the funds are spent.
Why the other options are wrong
- B. Wrong because financing methods are sources of funds, not expenditure.
- C. Wrong because statement 2 is incorrect.
- D. Wrong because statement 1 is correct.
Source to check: NCERT Class 12 Macroeconomics, Chapter 5 (Government Budget and the Economy) on capital vs revenue items; ICAI Accounting Standards basics
Answer from the official UPSC key. Written and fact-checked by AI against the official key. Spotted a mistake? Report it.