Which of the following is not an item of capital expenditure?
Answer Details
The item that is not a capital expenditure is "Payment of interest on loans."
Capital expenditure refers to expenses incurred for acquiring, improving, or extending a company's fixed assets, such as buildings, equipment, or land, that will be used for several years in the business. These expenditures usually involve significant outlays of cash and provide benefits to the company for an extended period.
Building of roads and bridges, building of dams, building of harbours, and supply of electricity all involve the acquisition or improvement of significant fixed assets and thus fall under the category of capital expenditure.
On the other hand, "Payment of interest on loans" is not an acquisition or improvement of any fixed asset, but it is a cost of borrowing money to finance the acquisition or improvement of fixed assets. Interest paid on loans is recorded as an expense in the income statement and not as a capital expenditure in the balance sheet.