Q. With reference to Capital Expenditure (CAPEX) consider the following statements:
1.Capital expenditures are short term expenditures that do not result in the creation of assets whereas Revenue expenditures are long term expenditures resulting in the formation of assets.
2.Capital expenditure has a multiplier effect.
Which of the statements given above is/are correct?

[A] 1 only

[B] 2 only

[C] Both 1 and 2

[D] Neither 1 nor 2

Answer: B
Notes:

Statement 1: The statement is incorrect. Capital expenditures are expenditures that result in the creation of assets whereas revenue expenditures are short term expenditures that do not result in the formation of assets.

Statement 2: Capital expenditure has a multiplier effect which means it helps in the creation of jobs and growth in economic growth.

Source: Live Mint