Expired Portion Of Direct Cost Is A Part Of

The expired portion of Capital Expenditure or direct cost is an Expense. So, the correct answer of this multiple choice question is (C), because in an expense, we may enjoy the benefit with the use of an asset. So, the expired portion of an asset, which may be enjoyed by the business with the passage of time, represents an expense. A business may start to gain benefits when an asset is utilized. An example of direct cost is paying Advance Rent to carry on the business operations. Now, when the business uses the rent facilities, i.e., used the buildings, operate the business, etc., then the business may start to get benefits i.e., delivery of goods to customers, more sales due to attractive building, etc., with the beginning of expiration of the direct cost of prepaid rent. Such expired portion of prepaid rent is a rent expense account.

In case of capital expenditure i.e., an addition to furniture, may provide benefits to the business when the furniture is utilized in the business. With the passage of time, the benefits associated with furniture is finishing and that expired portion is an expense for the business as now the expired portion of furniture has no future economic benefits associated with it during the period, let’s say after one month.