[amp_mcq option1=”a revenue expenditure” option2=”a capital expenditure” option3=”a long term expense” option4=”an accounting period expense” correct=”option2″]
The correct answer is: B. a capital expenditure.
A capital expenditure is an expenditure that is incurred on the purchase of an asset that will be used for more than one accounting period. A software that will be used for more than 12 months is an asset, and therefore the purchase price of such software should be regarded as a capital expenditure.
A revenue expenditure is an expenditure that is incurred on the purchase of an asset that will be used up within one accounting period. A long term expense is an expense that is incurred on the purchase of an asset that will be used for more than one accounting period, but which is not considered to be a capital expenditure. An accounting period expense is an expense that is incurred in the current accounting period and which is not expected to have any benefit in future accounting periods.