Demolition costs are capital expenditure (a-3). Spark plug replacement is revenue expenditure (b-4). R&D is often deferred revenue expenditure (c-5). Theft is a revenue loss (d-2). Riot damage is a capital loss (e-1).

The profit is the difference between the sale price (Rs. 1,20,000) and the book value (Rs. 60,000), totaling Rs. 60,000. Since this is a gain on the sale of a fixed asset, it is treated as a capital profit.

Revenue receipts are those that arise from the normal course of business operations and are recurring in nature. Dividends received on investments represent income earned from holding assets, which is a recurring operational gain. Conversely, the sale of investments, bank borrowings, and land compensation are capital receipts as they involve either the disposal of assets, the creation of liabilities, or non-recurring inflows.

Capital expenditure provides long-term benefits and increases the value or capacity of an asset. The cost of accessories added to a motor vehicle at the time of purchase is considered part of the asset's acquisition cost and is capitalized. In contrast, expenses like loan raising costs or insurance premiums are generally treated as revenue expenditures as they relate to the operational or financing activities of the business.

Revenue receipts are those receipts which are obtained in the normal course of business operations. They are recurring in nature, meaning they occur repeatedly throughout the life of the business, such as sales revenue or interest income, and are credited to the Profit and Loss account.

Expenditure incurred on the routine maintenance or replacement of worn-out parts to keep an asset in working condition is classified as revenue expenditure. It does not increase the capacity or the life of the asset significantly, but rather maintains its current operational efficiency, thus falling under normal operating costs.

Expenditures incurred to bring a new asset into existence or to obtain a long-term advantage are generally classified as capital expenditures. In accounting terminology, the terms replacement and renewal are often used to describe the process of upgrading or substituting assets to maintain or enhance operational capacity, which aligns with the acquisition of new benefits or assets.

Expenditures that provide benefits to the business for more than one accounting period are classified as capital expenditures. Since the software is expected to be used for over 12 months, it is treated as an asset rather than an immediate expense. This cost is then capitalized and subsequently amortized over the software's useful life, reflecting its long-term contribution to the entity's operations.

An expense is defined as the cost incurred by a business to generate revenue during a specific period. When an expenditure is made for items or services that provide immediate benefit and do not result in a long-term asset, it is recognized as an expense. This aligns with the matching principle, where costs are recognized in the same period as the revenues they help to produce.

Expenditure that enhances the earning capacity or extends the useful life of a fixed asset is classified as capital expenditure. Unlike revenue expenditure, which is for day-to-day maintenance, capital expenditure provides long-term benefits and is capitalized on the balance sheet.