GK
ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Interest paid on loan during the construction of works
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Cost incurred for a new exit as required under the local bodies by laws
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Cost of pulling down an old building as also the payment made to the architect for the plan of a new building
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A dealer in purchasing sewing machines and spends some money on the repair of ten machines damaged while in transit
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Detailed explanation-1: -Revenue expenditures are short-term expenses used in the current period or typically within one year. The cost incurred for a new exit in a cinema hall as required under the local bodies by-laws is the revenue expenditure.
Detailed explanation-2: -Revenue expenditure includes: Salaries and pensions. spendings on different ministries and departments, etc. Grants made to state governments and other parties are also treated as revenue expenditures, even though these might be used for the creation of fixed assets.
Detailed explanation-3: -Revenue expenditures refer to the day-to-day expenditures incurred by the government to ensure its normal functioning. Hence, interest payments on the debt, defence purchases, and wage bill are all a part of the government’s revenue expenditure. Which of the expenditures given above is/are Non-Plan Revenue Expenditure?
Detailed explanation-4: -Correct Answer: Option (d) Replacement of a truck’s battery is the correct answer because the replacement of any nominal part of an asset is considered to be the revenue expenditure. The purchase of any fixed assets or related expense in connection with new assets is the capital expenditure.
Detailed explanation-5: -Revenue expenditure is for the normal running of Government departments and various services, interest payments on debt, subsidies, etc. Broadly the expenditure which does not result in creation of assets for Government of India is treated as revenue expenditure.