With reference to the expenditure made by an organisation or a company, which of the following statements is/are correct?
- 1. Acquiring new technology is capital expenditure.
- 2. Debt financing is considered capital expenditure, while equity financing is considered revenue expenditure.
Select the correct answer using the code given below:
1 only
2 only
Both 1 and 2
Neither 1 nor 2
Answer is Right!
Answer is Wrong!
This question was previously asked in
UPSC IAS – 2022
Statement 2 is incorrect. Debt financing (taking loans) and equity financing (issuing shares) are methods of raising funds for a company. They are balance sheet transactions (affecting liabilities and equity). The funds raised might be used for either capital expenditure (buying assets) or revenue expenditure (paying salaries, rent, etc.). The financing method itself (debt or equity) is not classified as capital or revenue *expenditure*.