Assertion Reason MCQs of Capital and Revenue Class 11 with Answers

Assertion Reason MCQs of Capital and Revenue Class 11 with Answers for CBSE, ISC and State Boards

Assertion (A): Cost of installing a new machine is capital expenditure and is debited to machine account.

Reason (R): It is capital expenditure because it is incurred before the machine is put to use.

Options:

(a) Both (A) and (R) are true and (R) is the correct explanation of (A)
(b) Both (A) and (R) are true and (R) is not the correct explanation of (A)
(c) (A) is true, but (R) is false
(d) (A) is false, but (R) is true

Ans – (a)

Assertion (A): ₹ 10,000 were spent on repairs of various machines, Such expense will be treated as revenue expenditure.

Reason (R): It is revenue expenditure since it is incurred in the ordinary course of business.

Options:

(a) Both (A) and (R) are true and (R) is the correct explanation of (A)
(b) Both (A) and (R) are true and (R) is not the correct explanation of (A)
(c) (A) is true, but (R) is false
(d) (A) is false, but (R) is true

Ans – (a)

Assertion (A): ₹ 50 Lac paid as damages by a transport company to its passengers injured in accident will be treated as Capital expenditure.

Reason (R): It will be treated as revenue expenditure since it is incurred in the ordinary course of business.

Options:

(a) Both (A) and (R) are true and (R) is the correct explanation of (A)
(b) Both (A) and (R) are true and (R) is not the correct explanation of (A)
(c) (A) is true, but (R) is false
(d) (A) is false, but (R) is true

Ans – (d)

Assertion (A): A sum of ₹ 5 Lac was spent on white-washing and painting of a new factory. Next year ₹ 1 Lac were again spent on white-washing. All such expenditure will be treated as capital expenditure.

Reason (R): ₹ 5 Lac will be treated as capital expenditure and ₹ 1 Lac as revenue expenditure.

Options:

(a) Both (A) and (R) are true and (R) is the correct explanation of (A)
(b) Both (A) and (R) are true and (R) is not the correct explanation of (A)
(c) (A) is true, but (R) is false
(d) (A) is false, but (R) is true

Ans – (d)

Assertion (A): Revenue Expenditure is shown in the Trading and Profit and Loss Account.

Reason (R): Capital Expenditure is shown in the Balance Sheet.

Options:

(a) Both (A) and (R) are true and (R) is the correct explanation of (A)
(b) Both (A) and (R) are true and (R) is not the correct explanation of (A)
(c) (A) is true, but (R) is false
(d) (A) is false, but (R) is true

Ans – (b)

Assertion (A): ₹ 10 Lac spent on replacement of worn-out part of an existing machine is revenue expenditure.

Reason (R): It is revenue expenditure because it is incurred in maintaining the earning capacity and does not result in an increase in the earning capacity of the business.

Options:

(a) Both (A) and (R) are true and (R) is the correct explanation of (A)
(b) Both (A) and (R) are true and (R) is not the correct explanation of (A)
(c) (A) is true, but (R) is false
(d) (A) is false, but (R) is true

Ans – (a)

Assertion (A): ₹ 10,00,000 were spent on advertising of a new product and it is estimated that its benefit will last for 5 years. In such a case ₹ 8,00,000 will be shown on the assets side at the end of the first year.

Reason (R): ₹ 8,00,000 is deferred revenue expenditure and will be written off in the next four years.

Options:

(a) Both (A) and (R) are true and (R) is the correct explanation of (A)
(b) Both (A) and (R) are true and (R) is not the correct explanation of (A)
(c) (A) is true, but (R) is false
(d) (A) is false, but (R) is true

Ans – (a)

Assertion (A): ₹ 1,00,000 received from a debtor whose account was previously written off as bad is a capital receipt.

Reason (R): ₹ 1,00,000 received from sale of an old machine is capital receipt.

Options:

(a) Both (A) and (R) are true and (R) is the correct explanation of (A)
(b) Both (A) and (R) are true and (R) is not the correct explanation of (A)
(c) (A) is true, but (R) is false
(d) (A) is false, but (R) is true

Ans – (d)

Assertion (A): ₹ 20 Lac Received as subsidy from State Government is revenue receipt.

Reason (R): ₹ 20 Lac Received as grant from State Government for the construction of quarters of staff is capital receipt.

Options:

(a) Both (A) and (R) are true and (R) is the correct explanation of (A)
(b) Both (A) and (R) are true and (R) is not the correct explanation of (A)
(c) (A) is true, but (R) is false
(d) (A) is false, but (R) is true

Ans – (b)

Assertion (A): Capital Expenditure is a real account.

Reason (R): Revenue expenditure is a nominal account.

Options:

(a) Both (A) and (R) are true and (R) is the correct explanation of (A)
(b) Both (A) and (R) are true and (R) is not the correct explanation of (A)
(c) (A) is true, but (R) is false
(d) (A) is false, but (R) is true

Ans – (b)