Capital expenditure

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If a machine is producing 10000 units due to sudden defect in the machine in a particular month with a standard set at 16000 units/month, any expenditure done on such machine which increases the production to 14000 units/month.

What should be the classification of such expenditure? Capital OR Revenue expenditure. 

Also, the producing capacity of the machine when it was purchased was 20000 units/month.

 

Thanks in advance,

Anshuman Prasad

Replies (6)
Expenditure wil be capitalised only if it increases the capacity to beyond previously assessed std..since in the given case previous standard was 16000 so Expenditure should not be capitalised...it will be revenue expenditure....
It is a revenue expenditure since the extra cost never resulted in an increased capacity than its original capacity.
sanjeev kandhai cma
Revenue because it increase d production capacity....it give same pro in all d months...
You cant treat it as capital expediture.As any expenditure can be treated as a capital expenditure only if the expenditure increases the production beyond its standard capacity. Hence all the expenditure incurred which brings the production capacity at par with the standard capacity cannt be capitalised.
Revenue as it does not increase production capacity


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