Examples Of Revenue Expenditure And Capital Expenditure

Questions from 11 to 20.

Examples of revenue expenditure and capital expenditure. Expenditure incurred to carry on in the normal course of business for the current year and to keep assets in assets in satisfactory operating condition revenue. In the case of a capital expenditure an asset has been purchased by the company which generates revenue for upcoming years. However from this blog post you can normally identify the revenue and capital expenditure and may be able to give proper treatment in the financial statement. So it s recorded in the p l statement as a revenue expense.

When your company purchases a storage area it s recorded as a capital asset in the balance sheet. Capital expenditures and revenue expenditures with examples capital expenditures. An expenditure is a capital expenditure if the benefit of the expenditure extends to several trading years. Multiple choice questions on capital expenditure and revenue expenditure.

Capital expenditure capital expenditure includes costs incurred on the acquisition of a fixed asset and any subsequent expenditure that increases the earning capacity of an existing fixed asset. Capital expenditure constitutes those expenses that are typically incurred while acquiring capital assets or upgrading the current ones. Questions from 1 to 10. Expenditure on non current assets which does not increase the life of the asset or improve the asset beyond returning it to its earlier condition is treated as revenue and not capital expenditure.

The expenses a firm incurs each day to maintain its daily business activities are revenue expenditure. Capital expenditure may include the following expenditures expenditure incurred on the acquisition of fixed assets tangible. Both have its own merits and demerits. Meaning of revenue expenditure.

Revenue expenditure is made during the. On the other hand when capital expenditure consider as revenue expenditure it will understate the profit of the company and the fixed assets may disappear from the list and can be theft. Revenue expenditure refers to those expenditures which are incurred during normal business operation by the company benefit of which will be received in the same period and the example of which includes rent expenses utility expenses salary expenses insurance expenses commission expenses manufacturing expenses legal expenses postage and printing expenses. Revenue expenditure is included in the income statement as an expense of the business for the accounting period.

Explore the other resources for capital and revenue expenditure. All the painting and refurbishing do not add to the revenue generating capacity of the asset. The distinction between the nature of capital and revenue expenditure is important as only capital expenditure is included in the cost of fixed asset. Interactive past paper multiple choice questions practice.

The business expenditures are of two types capital expenditures revenue expenditures capital expenditures definition and explanation of capital expenditures.