Question

The purchase of a new building would be considered a(n)

None of the other possible responses are correct.

expense.

capital expenditure.

operating activity.

financing activity.

Answer 1

capital expenditure.

The Purchase of new building is Capital Expenditure and also an investing activity. Expenses are incurred for a period-for example rent for a month, insurance for a year, salary for the month etc.But, capital expenditure is incurred once and advantage of which comes to business for long times.This is not also an operating activities because activties that are incurred for conducting the operation of business is termed as operating activities.