Accounting · Capital and Revenue Expenditure
An infrastructure company is constructing a mega bridge in Bihar with a projected completion date in 2027 and it takes a loan of 100 crore rupees from a public sector bank at 9 percent interest per annum. During the fiscal year 2025, the company pays 9 crore rupees as interest on this loan while the construction is still in progress and also pays 20 lakh rupees as brokerage for the acquisition of the land for the bridge pillars. Furthermore, it spends 15 lakh rupees on temporary huts for workers at the site which will be demolished once the project is over. Classify these expenditures.
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Interest of 9 crore rupees is revenue expenditure, while brokerage of 20 lakh rupees and temporary huts of 15 lakh rupees are capital expenditures.
- 2Brokerage of 20 lakh rupees is capital expenditure, while interest of 9 crore rupees and temporary huts of 15 lakh rupees are revenue expenditures.
- 3All three items - interest of 9 crore rupees, brokerage of 20 lakh rupees, and temporary huts of 15 lakh rupees - are capital expenditures.✓
- 4Interest of 9 crore rupees and brokerage of 20 lakh rupees are revenue expenditures, whereas the temporary huts of 15 lakh rupees are capital expenditures.
Correct answer
All three items - interest of 9 crore rupees, brokerage of 20 lakh rupees, and temporary huts of 15 lakh rupees - are capital expenditures.
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