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Lets say a business sells cars. So when it purchases cars, it is a revenue expenditure.
What if a business purchase a car to use as a test drive car in the business? Is it considered a capital or revenue expenditure?
And, what if the business purchase the car as a display car in the showroom? Would that be a revenue or capital expenditure?
It depends on their intentions – if they intend to keep it for a time and use it in the business then it would be capital expenditure.
One bought for test drives would be likely to be treated as capital expenditure; one bought as a display car would likely be treated as revenue expenditure (because they would not be using it, and most garages would still expect to sell it).However, this really would not be tested on it Paper F3 🙂
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