Question

smart touch learning paid $300 to have its hot water heater repaired in its office building. this expenditure would be considered a revenue expenditure recorded on the income statement

Answer 1

Smart Touch Learning should classify the $300 hot water heater repair as a revenue expenditure, which would be recorded as an expense on the income statement for the period in which the repair was made.

Step-by-step explanation:

The question relates to an expenditure made by Smart Touch Learning for the repair of a hot water heater in its office building, asking whether it should be classified as a revenue expenditure and if it should be recorded on the income statement. This is a business-related question that pertains to accounting principles.

A revenue expenditure is a cost that is charged to expense as soon as the cost is incurred. By contrast, a capital expenditure is a cost that is capitalized, or included in the cost of an asset and expensed over the life of that asset through depreciation.

The repair of the hot water heater for $300 would typically be considered a revenue expenditure because it is likely to be a maintenance expense that does not extend the life of the asset significantly nor increase its value.

Therefore, Smart Touch Learning would record this $300 as an expense on their income statement for the period in which the repair was made, which reduces the accounting profit for that period.