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WAEC Financial Accounting 2004 Question 39

Question 39

Capital and Revenue Expenditure

An expense is said to be revenue in nature if it

  1. A.adds or contributes to the operating income of the business.
  2. B.reduces the capital of the business
  3. C.necessitates the introduction of additional capital
  4. D.adds to or improves the value of fixed assets.
Show the answer and explanation

Answer: A (adds or contributes to the operating income of the business.)

Explanation

Revenue expenditure supports day-to-day earning of income.