S1: Capital expenditure increases the earning capacity of the business. S2: Revenue expenditure maintains the earning capacity of the business. Which statement(s) is/are correct? MCQ with Answer and Explanation
S1: Capital expenditure increases the earning capacity of the business. S2: Revenue expenditure maintains the earning capacity of the business. Which statement(s) is/are correct?
A. S2 only
B. Neither S1 nor S2
C. Both S1 and S2
D. S1 only
Answer: Option C
Solution (By JKSSB Mock Tests)
Capital expenditure is incurred to acquire or improve assets, thereby increasing earning capacity. Revenue expenditure is incurred for day-to-day operations to maintain the existing earning capacity. Both statements are correct.
Assertion (A): In a bank reconciliation statement, if we start with the overdraft balance as per the Cash Book, cheques deposited but not credited by the bank will be added. Reason (R): Cheques deposited but not credited increase the bank balance as per the pass book, but not the cash book. Choose the correct option.
A.Both A and R are true but R is NOT the correct explanation of A
B.A is false but R is true
C.A is true but R is false
D.Both A and R are true and R is the correct explanation of A
Explanation:
A is false. If starting with an overdraft as per the Cash Book, cheques deposited but not credited (which increase the pass book balance) must be deducted to increase the overdraft amount, not added. R is true as a standalone statement.
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