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?
Explanation:
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.
S1: In a partnership, if a partner retires, his loan to the firm is transferred to his loan account, which is a liability for the firm. S2: If the retiring partner's loan is not settled immediately, it is treated as a loan and interest is allowed as per the deed or at 6% p.a. if the deed is silent. Which statement(s) is/are correct?
Explanation:
Both statements are correct. Upon retirement, the partner's capital balance is transferred to his loan account if not paid immediately. This becomes a liability, and interest is charged to the P&L Account at the agreed rate or 6% p.a. if silent.
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