UPSC Prelims 2022 · Question 9 of 98
UPSC Prelims 2022 question on Capital vs Revenue Expenditure
- ExamUPSC CSE
- Year2022
- PaperGeneral Studies Paper I
- SubjectIndian Economy
- TopicPublic Finance
- DifficultyMedium
- TypeStatement
With reference to the expenditure made by an organisation or a company, which of the following statements is/are correct?
1. Acquiring new technology is capital expenditure.
2. Debt financing is considered capital expenditure, while equity financing is considered revenue expenditure.
Select the correct answer using the code given below:
Show answer
Answer: A. 1 only
Verdict
Correct statement: 1 only → Option (a).
Statement by statement
Statement 1 – CORRECT: Capital expenditures (CapEx) are funds used by a company to acquire, upgrade, and maintain physical assets such as property, plants, buildings, technology, or equipment. Acquiring new technology and computer equipment are considered part of capital expenditure.
Statement 2 – INCORRECT: Both debt financing and equity financing are considered part of capital receipts for the company, not capital or revenue expenditure. Debt financing involves borrowing money (bonds, bills, notes) and equity financing involves issuing stock to raise money. Funds from these are used by the company for capital expenditure to grow or expand its operations. Hence statement 2 is not correct.