Accounting for Revenue and Capital Expenditures

Subsequent expenditures made on property, plant, and equipment can be in the form of either capital or revenue expenditures. As we noted, the distinction between the two is often hazy and depends on the accounting policies developed by management. However, the distinction is important because it affects the determination of current and future periods’ income. … Read more

Capital vs Revenue Expenditures

What is the expenditure? Throughout accounting, we have used the term expenditure to refer to payment of an asset or the incurrence of liability in exchange for another asset or for a service rendered. Capital Expenditure The expenditure is made in cash or on credit and results in the firm’s receiving another asset, such as … Read more

Rules for determining revenue expenditures

Revenue expenditures There is a difference between “Income” & “Revenue”. Income of any form is called Revenue, whereas, Revenue represents any income or expenditure. Revenue expenditures refer to the amount spent on routine expenses of the business e.g. salaries paid to employees, Rent of office paid etc. As revenue expenditure provides benefits for the current … Read more

Capital and revenue expenditures

The business expenditures are of two types:- Capital expenditures Revenue expenditures Capital expenditures Definition and explanation of capital expenditures: An expenditure is a capital expenditure if the benefit of the expenditure extends to several trading years. Capital expenditure may include the following expenditures:- Expenditure incurred on the acquisition of fixed assets, (tangible or intangible) which … Read more

Difference between capital and revenue expenditures

It is not easy to decide whether a particular expenditure is of capital nature or that of revenue. Some expenses may lie on borderline and difficulty arises in deciding whether these are capital or revenue. This difficulty can easily be removed by answering the following questions:- Does the expenditure incurred in acquiring a fixed asset? … Read more

Items of revenue expenditures becoming capital expenditures

The following are the important examples of which are usually revenue, but under certain circumstances they become capital expenditure:- Legal charges Generally legal charges are revenue expenses, but legal charges paid in connection with the purchase of property or other fixed asset such as land, building, furniture, machinery and patents etc., are capital expenditure, as … Read more

Capital and revenue payments

Definition Expenditure is the full amount incurred by the business concern whether paid or not while the term payment refers to the amount actually paid. Payment is of two types:- Capital payment Revenue payment Capital payments The capital payments are the amount actually paid on account of some capital expenditures. Example: Some furniture is purchased … Read more

Capital and revenue receipts

Receipts are the amounts actually received. The receipts of business are of two kinds:- Capital receipts Revenue receipts Capital receipts Explanation: Capital receipts include the following: Receipts from the sale of fixed assets of a business. Payments into the business made either by Proprietor of business or by shareholders of a company to start a … Read more