Which of the following is not true of capital expenditure? i. assets acquired for the purpose of earning income ii. extension of office building iii. it is ...

Which of the following is not true of capital expenditure? i. assets acquired for the purpose of earning income ii. extension of office building iii. it is incurred and its full benefits consumed in one period of account

Answer Details

The statement that is not true of capital expenditure is "iii. it is incurred and its full benefits consumed in one period of account." Capital expenditure refers to the funds spent by a business to acquire or improve assets that have long-term value and are essential for the business's operations. Examples of capital expenditures include the purchase of property, plant and equipment, and investments in software or other intangible assets. Option i is true because capital expenditure is incurred to acquire assets that are expected to generate income for the business in the future. Option ii is also true because an extension of the office building is considered a capital expenditure as it adds value to the property and has long-term benefits. Option iii is false because capital expenditure is expected to generate benefits over several accounting periods and not just one. For example, if a company purchases a new machine that will be used for the next 10 years, the full benefits of that machine will be realized over those 10 years, and not just in the year of purchase. In summary, capital expenditure is not fully consumed in one period of account and, therefore, option iii is not true.