Government of Andhra Pradesh spent Rs 2 crore for construction of a bridge above the Godavari river. According to you, how will this transaction be treated?
Answer & explanation
Correct answer: option 3
The correct answer is Option 3: Capital expenditure
The spending of Rs 2 crore by the Government of Andhra Pradesh for the construction of a bridge is classified as capital expenditure. Capital expenditure involves spending on the creation or acquisition of fixed assets like infrastructure, buildings, and equipment, which have a long-term benefit and utility.