The correct answer is: A. capital expenditure
Capital expenditure is an expenditure that is incurred on the purchase of fixed assets, such as land, buildings, and equipment. These assets are used in the production of goods or services and are expected to have a useful life of more than one year.
Capital expenditure increases the earning capacity of a business in a number of ways. First, it allows the business to produce more goods or services. Second, it can improve the quality of the goods or services that the business produces. Third, it can help the business to reduce costs.
Revenue expenditure is an expenditure that is incurred on the day-to-day running of a business. This includes expenses such as salaries, rent, and utilities. Revenue expenditure does not increase the earning capacity of a business.
Deferred revenue expenditure is an expenditure that is incurred in one accounting period but is not recognized as an expense in that period. Instead, it is recognized as an asset and is amortized over a period of time. Deferred revenue expenditure does not increase the earning capacity of a business.
In conclusion, capital expenditure is the only type of expenditure that increases the earning capacity of a business.