A major improvement expense this year becomes a reserve item in the following years.

A major improvement expense this year becomes a reserve item in the following years.

• A. They are routine repairs
• B. They are funded by maintenance budget
• C. They are small costs
• D. They last more than one year and involve large funding; increase life/useful/value

Answer: (D)

The concept here is capital improvements that provide benefits beyond the current year. A major improvement is a long‑lasting asset or one that extends the life or value of an asset, so it’s funded as a reserve item rather than from the operating maintenance budget. Because its useful life exceeds one year and it involves substantial funding, it belongs in reserves to be funded over time for future replacement or major upkeep. Routine repairs are smaller, immediate expenses charged to the operating budget and don’t become reserve items, which is why the other ideas don’t fit.

The concept here is capital improvements that provide benefits beyond the current year. A major improvement is a long‑lasting asset or one that extends the life or value of an asset, so it’s funded as a reserve item rather than from the operating maintenance budget. Because its useful life exceeds one year and it involves substantial funding, it belongs in reserves to be funded over time for future replacement or major upkeep. Routine repairs are smaller, immediate expenses charged to the operating budget and don’t become reserve items, which is why the other ideas don’t fit.