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In the question richard is a self employed restaurant owner He incursrepairs for decorating restaurant of 5100. Below they have given a not that ” property was unusable state when purchased” Per dedcutible expenses any “The cost of Initial repairs to improve an asset recently acquired to make it lit to earn profits is disallowable capital expenditure”
But in the answer they have not made any adjustments to this 5100. can u plls explain why is was not added back to net profit to find adjusted profit.
I do not have the BPP material to check wording of question and answer but if repairs expenditure is indeed incurred following acquisition of an asset unusable for purpose acquired then it will be treated as capital expenditure and added back in the adjustment of profit if of course it had been deducted in deriving the accounting profit. Also check whether that statement is applicable to the the decorating expense or to any other expenditure under the repairs heading
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