Thank you for visiting Bill s Wrecker Service has just completed a minor repair on a tow truck The repair cost was 920 What type of expenditure is this. This page is designed to guide you through key points and clear explanations related to the topic at hand. We aim to make your learning experience smooth, insightful, and informative. Dive in and discover the answers you're looking for!
Answer :
The repair cost of $920 for a tow truck by Bill's Wrecker Service is a revenue expenditure since it is a cost incurred in the course of normal operations to maintain an asset without increasing its life or efficiency. Therefore Option A) Revenue expenditure is correct.
The minor repair on a tow truck that cost Bill's Wrecker Service $920 is a type of expenditure that would be considered a revenue expenditure. A revenue expenditure refers to the costs that are incurred in order to earn revenue and maintain existing assets without increasing their life or efficiency. In contrast, a capital expenditure is a more significant investment that increases the capacity, efficiency, or lifespan of an asset.
Revenue expenditures are part of the normal, ongoing costs of operating and are typically expensed in the period in which they occur. This means they are recognized as expenses when they are incurred, as they are linked to the revenues of the current period. Conversely, capital expenditures are capitalized and depreciated over the life of the asset, adding to the value of the asset on the balance sheet.
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