Which of the following statements about capital items is correct?

Answer & explanation

Correct answer: option 3

The correct answer is Option (3) → Capital items are goods that are used in the production of finished goods.

Option (1) Capital items are goods that enter the manufacturer’s products completely. — False. Goods that enter the manufacturer’s product completely, such as cotton or glass, are materials and parts.

Option (2) Capital items are short lasting goods that facilitate managing the finished product. — False. Short lasting goods that help in developing or managing the finished product, such as paint and lubricants, are supplies and business services.

Option (3) Capital items are goods that are used in the production of finished goods. — True. Capital items are goods used in the production of finished goods. They include installations like elevators and equipment like hand tools and fax machines.

Option (4) Capital items include component parts like tyres and batteries. — False. Tyres and batteries are component parts. They belong to materials and parts, because they become part of the product.

NCERT (2026-27 Edition): “Classification The industrial goods are classified into the following major categories:
(i) Materials and Parts: These include goods that enter the manufacture’s products completely. Such goods are of two types:
(a) raw material: including farm products like cotton, sugar cane, oil seed and natural products such as minerals (say crude petroleum, iron ore), fish and lumber; and
(b) manufactured material and parts. These are again of two types – component materials like glass, iron, plastic and component parts such as tyre, electric bulb, steering, and battery.
(ii) Capital Items: These are such goods that are used in the production of finished goods. These include:
(a) installations like elevators, mainframe Computers, and
(b) equipments like Hand Tools, Personal Computer, Fax Machines, etc.
(iii) Supplies and Business Services: These are short lasting goods and services that facilitate developing or managing the finished product. These include:
(a) maintenance and repair items like Paint, Nails, etc., and
(b) operating supplies like Lubricant, Computer Stationary, Writing Paper, etc.”