IGCSE Accounting Paper-2: Specimen Questions with Answers 183 - 183 of 189

Question 183

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Describe in Detail

Essay▾

Devoleena owns a cyber cafe. Indicate with a tick mark each item belonging to the kind of expenditure. (Marks 3)

(I) Monthly rent for the building used for cafe

(II) Expenses incurred for installing computers in the cafe

(III) Repair of a second hand purchased computer to bring it into working condition

(IV) Regular High Speed internet charges

(V) Salary of a cafe manager

Devoleena owns a cyber cafeDevoleena owns a cyber cafe
CapitalRevenue
(I)
(II)
(III)
(IV)
(V)

Explanation

Devoleena owns a cyber cafeDevoleena owns a cyber cafe
CapitalRevenue
(I)
The Monthly rent for the building used for cafe

The Monthly Rent for the Building Used for Cafe

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(II)
The Expenses incurred for installing computers in cafe

The Expenses Incurred for Installing Computers in Cafe

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(III)
The Repair of a second hand purchased computer

The Repair of a Second Hand Purchased Computer

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(IV)
The Regular High Speed internet charges

The Regular High Speed Internet Charges

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(v)
The Salary of a cafe manager

The Salary of a Cafe Manager

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  • Monthly rent, regular internet charges and salary are recurring nature whose benefits will be fully utilized in the same accounting year in which it is incurred. So, these are revenue expenditures.
  • Computers are fixed assets for a cyber café. Expenses incurred for the installation computers are non-recurring in nature and its benefits will continue to be utilized in subsequent accounting years. So, this is a capital expenditure.
  • All additional expenses incurred at the time of purchasing a fixed asset are also treated as capital expenditure. Further, expense incurred to bring a fixed asset into working condition is also treated as capital expenditure.

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