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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA TX-UK Exams › Replacement cost
Sir
Richard owns a freehold shop which is let out unfurnished. The shop was purchased on 1 October 2013, and during October 2013 Richard spent £8,400 replacing the building’s roof.
The shop was not usable until this work was carried out, and this fact was represented by a reduced purchase price.
I don’t understand why is not increase expenses as “The shop was not usable until this work was carried out”
or
“this fact was represented by a reduced purchase price.” Sir does that means the £8,400 have already been deducted from the purchase price and we don’t need to reduce it?
Only revenue expenditure is allowable against property income. As the property was NOT usable for the purpose acquired the expenditure is classed as capital not revenue and is therefore disallowed.
ok I understand better now