Expenditure on the Installation of Machinery and on the Construction on Building: Machinery and Building are the assets of a business. Any expenditure incurred on carriage and installation of machinery, e.g., freight, wages paid for the installation, etc., is ‘capital expenditure’ and therefore, is debited to the Machinery Account. In other words, all expenses incurred on the purchase of an asset (except goods) increase the cost of the asset for the buyer. These are, therefore, to be debited to the particular Asset Account and not to Expense Account. Similarly, any expenditure incurred for the construction of building such as purchase of construction materials and payment of wages are also capital expenditure and debited to the Building Account.
Illustration 11. Journalise the following transactions in the books of Gopal, a trader:
Solution:
JOURNAL
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