Westland,Inc.owns a delivery truck.Which of the following costs,associated with the truck,will be treated as a revenue expenditure?

Question

Quizplus · Accepted Answer

Oil change and lubrication expenses are regular and routine maintenance costs that are incurred to keep the delivery truck operational, and they do not provide any long-term benefits. Hence, they are treated as revenue expenditures.

B, C, and D are treated as capital expenditures as they provide long-term benefits to the business. A major engine overhaul (B) improves the performance and extends the life of the truck, and modification for new use (C) adds value and functionality to the truck. Similarly, an addition to storage capacity (D) increases the capacity of the truck to carry more goods, resulting in higher revenue generation.