Capital Expenditures Involve Long-Term Asset Acquisition or Enhancement

Steps:

• Define capital expenditure as costs for acquiring, installing, or improving fixed assets that benefit the business over multiple years.
• Assess option 1: Wages for installing new equipment add to the asset's capitalized cost, making it capital.
• Assess option 2: Purchasing a new office computer acquires a fixed asset for long-term use, qualifying as capital.
• Assess options 3 and 4: Option 3 is personal use of assets, not business capital; option 4 involves routine maintenance parts, treated as revenue expenditure.

Why A is correct:

• Options 1 and 2 directly relate to acquiring or enhancing business fixed assets, per accounting principles like IAS 16, which capitalizes installation costs and asset purchases.

Why the others are wrong:

• B includes 3, a non-business personal expense ineligible for capitalization.
• C includes 3 (personal) and excludes 1 (installation capital cost).
• D includes 4 (revenue maintenance) and excludes 1 (capital installation).

Final answer: A