Saturday, July 5, 2014

What is a revenue expenditure versus capital expenditure?

capital expenditure is an amo, spent to acquire or improve a long-term asset such as buildings or equipment. Usually the cost is recorded in an account classified as Plant and Equipment & Property, Furniture & Fixture. The cost (except for the cost of land), will be charged as depreciation expense over the useful life of the asset to the Profit & Loss A/c

revenue expenditure is an amount that is incurred immediately,—thus being matched with revenues of the current accounting period. Routine repairs are revenue expenditures because they are charged directly to Repairs & Maintenance Expense. Even significant repairs that do not improve the asset & do not extend the life of the asset  (the repairs merely maintain the asset to its previous condition) are revenue expenditures.

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