Question

Demmert Manufacturing incurred the following expenditures during the current fiscal year: annual maintenance on its equipment, $5,900; remodeling of offices, $22,500; rearrangement of the shipping and receiving area resulting in an increase in productivity, $35,500; addition of a security system to the manufacturing facility, $25,500. How should Demmert account for each of these expenditures? Amount Classification Accounting treatment Expenditure Annual maintenance on equipment Remodeling of offices Rearrangement of the shipping and receiving area Addition of a security system

Answer 1

Expenditure	Amount	Classification	Accounting treatment
Annual maintence on equipment	5900	Revenue expenditure	It should write off to Income statement as an expenditure which only an expense to a fixed asset.
Remodeling off offices	22500	Revenue expenditures	It is assume that is for Revenue Nature and it doesnt increase the capacity of building. It should write off to Income statement as an expenditure
Rearrangement of shipping and receiving Area	35500	Capital expenditures	It is capitalised because of improve in capacity of production. it should shown under fixed asset.
Addition of a security system	25500	Capital expenditures	It is a purchasse of fixture . so it shuld capitalise under fixed asset under fixtures

Revenue expenditure is a cost that will be an expense in the accounting period when the expenditure takes place.Revenue expenditures are often discussed in the context of fixed assets. The revenue expenditures take place after a fixed asset had been put into service and simply keeps the asset in working order.

Capital expenditures refer to funds that are used by a company for the purchase, improvement, or maintenance of long-term assets to improve the efficiency or capacity of the company.