Machinery of the book value of ₹15,000 was sold for ₹15,000 and a new machine was purchased for ₹10,000 and cartage of ₹250 was paid for the machine. Compute the amount of capital expenditure.

Correct option is D

Capital expenditure refers to the total cost incurred to acquire a fixed asset and make it ready for use. Here, the new machinery was purchased for ₹10,000, and an additional ₹250 was paid as cartage, which is a direct cost related to bringing the asset to its working condition. Thus, Capital Expenditure = Purchase Price + Cartage = 10,000 + 250 = ₹10,250.
The sale of old machinery does not affect capital expenditure; it is treated separately in accounting (Profit/Loss on sale).
Therefore, the correct amount of capital expenditure is ₹10,250.
Information Booster
· Capital expenditure includes all costs necessary to acquire an asset and prepare it for use.
· Expenses such as installation charges, freight, cartage, and testing expenses are added to the cost of the asset.
· Revenue expenditure relates to day-to-day expenses and does not add value to the asset.
· Sale of old machinery affects profit/loss but not the cost of the new asset.
· Capital expenditure increases future earning capacity, while revenue expenditure maintains current capacity.