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JAMB Principles of Accounts 1994 Question 6

Question 6

Capital and Revenue Expenditure

When a business incurs labour cost in installing a fixed asset, the cost is treated as

  1. A.additional cost to the asset
  2. B.business wages and salaries
  3. C.installation cost of the asset
  4. D.business cost of the asset.
Show the answer and explanation

Answer: A (additional cost to the asset)

Explanation

All costs needed to get a fixed asset ready for use, including installation labour, are capitalised as part of the asset's cost.