8.1

(a) How would you distinguish between capital and revenue expenditure, and why is it important to make a correct allocation?

(b) State, with reasons, in which of the two categories you would place the following items:

(i) Replacement of the blade on a cutting machine damaged as the result of using poor-quality raw material inputs.

(ii) A feeding device costing £1,000 that is fixed to a machine so as to enable a 20 per cent increase in throughput each hour.

(iii) The cost of transporting to the factory a new machine supplied by a Japanese company.

(iv) Second-hand plant purchased at a cost of £1,500.

(v) Repairs to the plant mentioned in (iv), costing £800, before it is ready for use.