ASSERTION(A): Capital expenditure increases the earning capacity of the business. REASON(R): Capital expenditure is incurred for day-to-day conduct of the business.

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KollegeApply · Accepted Answer

A is true, but R is false. Explanation: The assertion is true because capital expenditure increases a business’s earning capacity by creating or improving long-term assets, such as machinery and buildings, that provide benefits in future years. However, the Reason is false because expenditure incurred for the day-to-day conduct of business is known as revenue expenditure, not capital expenditure.

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