Accounting · Capital and Revenue Expenditure
When a bank purchases a high-value fixed asset such as a new server for its data center and pays additional amounts for installation and staff training to operate the server, how should these costs be recorded according to the operational aspects of accounting entries?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Only the server cost should be capitalized, and both installation and training should be treated as deferred revenue expenditure.
- 2The entire amount should be treated as a revenue expense in the year of purchase to claim a higher tax deduction.
- 3The server cost and installation cost should be capitalized, while the training cost should be treated as a revenue expense.✓
- 4All costs including server, installation, and staff training should be capitalized and added to the cost of the asset.
Correct answer
The server cost and installation cost should be capitalized, while the training cost should be treated as a revenue expense.
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