Exercises · Q3
Q.Distinguish between Capital Expenditure and Revenue Expenditure.
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Start your 14-day free trial to unlock the full solution →| Basis | Capital Expenditure | Revenue Expenditure |
|---|---|---|
| Purpose | Acquires a fixed asset, or improves/increases the earning capacity of an existing one | Meets the day-to-day running costs of the business |
| Duration of benefit | Extends beyond one accounting year | Confined to the current accounting year |
| Where shown | Asset side of the Balance Sheet | Trading Account or Profit and Loss Account |
| Frequency | Occurs occasionally/non-recurring | Recurring, incurred regularly |
| Examples | Purchase of machinery/furniture/building, installation charges on a new asset, an addition that extends an asset's life | Purchase of goods for resale, wages, salaries, rent, ordinary repairs that only maintain (not improve) an asset |
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