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UPSC Prelims 2022 Paper-1 📅 05 Jun, 2022

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:

A
(a) 1 only
B
(b) 2 only
C
(c) Both 1 and 2
D
(d) Neither 1 nor 2
Result Summary
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UPSC Prelims
2022 • 05 Jun, 2022 • Paper-1
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:
Correct Answer
(a) 1 only
Statement 1 Analysis: Correct. Capital expenditure (CapEx) involves funds used to acquire, upgrade, and maintain physical assets or valuable intangible assets l......
Ref/Book : UPSC Prelims 2022
Ref. Subject Economy
Chapter -
Ref. Topic Public Finance
Pg. No -
💡 Analysis & Explanation
Statement 1 Analysis ▼
Correct. Capital expenditure (CapEx) involves funds used to acquire, upgrade, and maintain physical assets or valuable intangible assets like proprietary new technology. It creates long-term value.
Statement 2 Analysis ▼
Incorrect. Debt financing and equity financing are methods of 'raising funds' (receipts), not categories of 'expenditure'. Categorizing them as capital or revenue expenditure is fundamentally flawed in accounting terms.
Conclusion ▼
Only statement 1 uses the correct financial terminology and concept.
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