BUSINESS ADMINISTRATION
FINANCIAL ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Wages account
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Repairs account
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Machinery account
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Cash account
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Detailed explanation-1: -Also any expense made in connection to fixed asset before commencement of business is regarded as capital expenditure, which means the respective expenses would be debited to fixed asset A/c. Therefore, payment of Rs. 6, 000 as wages to workmen for installation of a machine should be debited to machinery A/c.
Detailed explanation-2: -Therefore, wages paid on installation of machinery is debited to Machinery Account.
Detailed explanation-3: -Installation charges incurred on machinery is debited to installation expense account.
Detailed explanation-4: -Any expenditure incurred on the carriage and installation of asset such as freight, transit expenses, installation expenses, wages etc, should be treated as capital expenditure and should be debited to the Asset A/c. This expenditure is non-recurring in nature and, thus, added to the value of the asset.
Detailed explanation-5: -Wages paid for installation of machinery debited to wages account is an error of principle.