Distinguishing Revenue from Capital Expenditure

Steps:

• Revenue expenditure maintains existing assets and is expensed immediately; capital expenditure acquires or enhances assets and is capitalized.
• Option 1: Painting new premises and machinery is initial setup or improvement, treated as capital expenditure.
• Option 2: Repairs to plant and machinery restore functionality without enhancement, qualifying as revenue expenditure.
• Option 3: Legal fees for purchase add to asset cost, making it capital expenditure.

Why B is correct:

• Repairs (option 2) are revenue expenditure under accounting principles like IAS 16, as they maintain asset condition without increasing value.

Why the others are wrong:

• A includes option 1, which is capital for initial improvements.
• C includes option 3, which is capital as part of acquisition costs.
• D selects only option 3, a clear capital expenditure.

Final answer: B