Question

Select the correct answers from each drop-down menu. phillip purchased a machine for his business last year. it cost $50,000. the machine required a skilled operator, who was a worker earning $2,000 per month. how will phillip treat the cost of the machine and the wages of the skilled operator in his books of accounts? in his books of accounts, phillip will record the machine as a(n) and the wages paid to the skilled operator as a(n) .

Answer 1

Philip will treat the cost of machine as an asset, and the wages paid to the skilled operator will be treated as an expense.

What is the difference between an asset and an expense?

An asset is referred to as such utility, whether tangible or intangible, which owned and controlled solely by a business organization in the normal course of business.

An expense, on the other hand, is regarded as the payments which are made for ensuring normal and smooth functioning of the business operations in a firm.

Some examples of assets are plant and machinery, goodwill, patents, land, building, and such others. While the examples of expenses include rent, salaries and wages.

Hence, the difference between an asset and an expense is given.

Learn more about assets and expenses here:

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