The correct answer is: A. Repairs on second hand asset purchased to put it into working condition.
Revenue expenditure is an expense that is incurred in the ordinary course of business and is not of a capital nature. It is usually expensed in the period in which it is incurred.
Preliminary expenses are expenses incurred in connection with the formation of a company. They are usually capitalized and amortized over a period of years.
The cost of issuing shares and debentures is a capital expenditure. It is the cost of raising capital and is usually capitalized and amortized over the life of the securities.
Legal expenses to defend a suit filed by a competitor are a revenue expenditure. They are incurred in the ordinary course of business and are usually expensed in the period in which they are incurred.
Here is a more detailed explanation of each option:
- Option A: Repairs on second hand asset purchased to put it into working condition. This is a revenue expenditure because it is an expense that is incurred in the ordinary course of business and is not of a capital nature. The asset is being repaired to put it into working condition, which is a necessary expense for the business.
- Option B: Preliminary expenses. This is a capital expenditure because it is an expense that is incurred in connection with the formation of a company. Preliminary expenses are usually capitalized and amortized over a period of years.
- Option C: Cost of Issuing shares and debentures. This is a capital expenditure because it is the cost of raising capital. The cost of issuing shares and debentures is usually capitalized and amortized over the life of the securities.
- Option D: Legal expenses to defend a suit filed by a competitor. This is a revenue expenditure because it is an expense that is incurred in the ordinary course of business. The business is incurring legal expenses to defend itself against a lawsuit, which is a necessary expense for the business.