Capital Expenditure vs Revenue Expenditure

This assignment provides a comprehensive study on the concepts of capital expenditure and revenue expenditure. It discusses the definitions, differences, and implications of these two types of expenses in the context of business financial statements. The study highlights the importance of distinguishing between capital expenditures, which are capitalized and provide long-term benefits, and revenue expenditures, which are expensed and provide short-term benefits. The assignment also explores the impact of these expenses on a company's financial position, performance, and profitability.

ACCOUNTING
FUNDAMENTALS

Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
(a) Ledger Accounts of Maxim for the period of April...............................................................1
(b) Trial Balance of Maxim at 30th April.....................................................................................3
(c)Financial statements of Maxim for the month ended 30th April.............................................4
TASK 2............................................................................................................................................5
(a) Ledger Accounts of Pendo for the period of January.............................................................5
(b)Trial Balance of Pendo at 30th April........................................................................................7
(c)Financial statements of Pendo for the month ended 31st Jan..................................................7
TASK 3............................................................................................................................................8
Sales A/c -........................................................................................................................................9
(b)Trial Balance of Mafuta at 31st Jan.......................................................................................13
(c) Financial Statements of Mafuta Ltd. For the year ended 31st Jan........................................13
TASK 4..........................................................................................................................................14
TASK 5..........................................................................................................................................21
(a)Demonstrate your research, differentiate between revenue expenditure and capital
expenditure................................................................................................................................21
with reference to International accounting standards................................................................21
CONCLUSION..............................................................................................................................22
REFERENCES..............................................................................................................................23

INTRODUCTION
Accounting is defined as the art and science of identifying, recording, classifying,
summarizing the transactions which are of financial nature and interpreting the results thereof.
These results are further communicated to the users of financial communication. Accounting is
concerned with evaluating the profit and loss for a stated financial period. The study is based on
fundamentals of accounting where the accounting entries are assessed to develop ledgers, closing
accounts, trial balance, income statements and balance sheets(O'Hanlon and Steele, 2000).
TASK 1
(a) Ledger Accounts of Maxim for the period of April
Date Journal Entry Debit Credit
5th April Cash A/c Dr. £300
To Capital A/c £300
7th April Purchase A/c Dr. £200
To Cash A/c £200
8th April Cash A/c Dr. £250
To Tatiana's Loan A/c £250
15th April Motor Van A/c Dr. £150
To Cash A/c £150
20th April Cash A/c Dr. £350
To Sales A/c £350
28th April Rent A/c Dr. £50
To Cash A/c £50
29th April Tatiana's Loan A/c Dr. £200
To Cash A/c £200
30th April Drawings A/c Dr. £60
To Cash A/c £60
Cash A/c -
Date Particulars Amount Date Particulars Amount
5th April To Capital A/c £300 7th April By Purchase A/c £200
1

8th April To Tatiana's
Loan A/c
£250 15th April By Motor Van A/c £150
20th April To Sales A/c £350 28th April By Rent A/c £50
29th April By Tatiana's Loan
A/c
£200
30th April By Drawings A/c £60
30th April By balance c/d £240
Total £900 Total £900
Capital A/c -
Date Particulars Amount Date Particulars Amount (£)
30th April To balance c/d £300 5th April By Cash A/c £300
Total £300 Total £300
Purchase A/c -
Date Particulars Amount Date Particulars Amount
7th April To Cash A/c £200 30th April By balance c/d £200
Total £200 Total £200
Tatiana's Loan A/c -
Date Particulars Amount Date Particulars Amount
29th April To Cash A/c £200.00 8th April By Cash A/c £250.00
30th April To balance c/d £50.00
Total £250.00 Total £250.00
Motor Van A/c -
Date Particulars Amount Date Particulars Amount
2

15th April To Cash A/c £150 30th April By balance c/d £150
Total £150 Total £150
Sales A/c -
Date Particulars Amount (£) Date Particulars Amount (£)
30th April To balance c/d 350 20th April By Cash A/c 350
Total 350 Total 350
Rent A/c -
Date Particulars Amount (£) Date Particulars Amount (£)
28th April To Cash A/c 50 30th April By balance c/d 50
Total £50 Total £50
Drawings A/c -
Date Particulars Amount (£) Date Particulars Amount (£)
30th April To Cash A/c 60 30th April By balance c/d 60
Total £60 Total £60
(b) Trial Balance of Maxim at 30th April
Account Debit (£) Credit (£)
Cash A/c £240
Purchase A/c £200
Tatiana's Loan A/c £50
Motor Van A/c £150
Capital A/c £300
Sales A/c £350
3

Drawings A/c £60
Rent A/c £50
Total £700.00 £700.00
(c)Financial statements of Maxim for the month ended 30th April
Statement of Profit & Loss for the month ended 30th April
Particulars Amount
Sales £350
Less: COGS £100
Gross Profit £250.00
Less : Rent £50
Less : Drawings £60
Operating Profit £140.00
Working Note :
Particulars Amount (£)
Opening Stock 0
Add: Purchases 200
Less: Closing Stock 100
Cost of goods sold (COGS) 100
Statement of financial position for the month ended 30th April
Assets Amount Liabilities Amount
Fixed assets Capital £300
Motor Van £150 Less : Drawings £60
Current Assets Add: Operating Profit £140
Inventory £100 £380.00
Cash £240 Tatiana's Loan £250
Less : Repaid Amount £200
£50.00
Total £490.00 Total £430.00
4

TASK 2
(a) Ledger Accounts of Pendo for the period of January
Journal Entries
Date Particulars Debit Credit
1st Jan Cash A/c Dr. £5000
To Capital A/c £5000
2nd Jan Motor Van A/c Dr. £600
To Cash A/c £600
3rd Jan Purchase A/c Dr. £1300
To Cash A/c £1300
4th Jan Cash A/c Dr. £1000
To Sergei's Loan A/c £1000
10th Jan Motor Van Expenses A/c Dr. £200
To Cash A/c £200
13th Jan Cash A/c Dr. £300
To Sales A/c £300
20th Jan Cash A/c Dr. £500
To Sales A/c £500
24th Jan Storage Expenses A/c Dr. £150
To Cash A/c £150
27th Jan Sergei's Loan A/c Dr. £350
To Cash A/c £350
30th Jan Drawings A/c Dr. £175
To Cash A/c £175
Cash A/c -
Date Particulars Amount (£) Date Particulars Amount (£)
1st Jan To Capital A/c £5000 2nd Jan By Motor Van A/c £600
4th Jan To Sergei's
Loan A/c £1000 3rd Jan By Purchases A/c £1300
13th Jan To Sales A/c £300 10th Jan By Motor Van
Expenses A/c £200
20th Jan To Sales A/c £500 24th Jan By Storage
Expenses A/c £150
27th Jan By Sergei's Loan
A/c £350
5

30th Jan By Drawings A/c £175
31st Jan By Balance c/d £4025
Total £6800 Total £6800
Capital A/c -
Date Particulars Amount Date Particulars Amount
1st Jan To Cash A/c £5000 31st Jan By balance c/d £5000
Total £5000 Total £5000
Motor Van A/c -
Date Particulars Amount Date Particulars Amount
2nd Jan To Cash A/c £600 31st Jan By balance c/d £600
Total £600 Total £600
Purchase A/c -
Date Particulars Amount Date Particulars Amount
3rd Jan To Cash A/c £1300 31st Jan By balance c/d £1300
Total £1300 Total £1300
Sergei's Loan A/c -
Date Particulars Amount Date Particulars Amount
27th Jan To Cash A/c £350 4th Jan By Cash A/c 1000
31st Jan To balance c/d £650
Total £1000 Total £1000
Motor Van Expenses A/c -
Date Particulars Amount Date Particulars Amount
10th Jan To Cash A/c £200 31st Jan By balance c/d £200
Total £200 Total £200
Sales A/c -
6

Date Particulars Amount (£) Date Particulars Amount (£)
31st Jan To balance c/d £800 13th Jan By Cash A/c £300
20th Jan By Cash A/c £500
Total £800 Total £800
Storage Expenses A/c -
Date Particulars Amount (£) Date Particulars Amount (£)
24th Jan To Cash A/c £150 31st Jan By balance c/d £150
Total £150 Total £150
Drawings A/c -
Date Particulars Amount Date Particulars Amount
30th Jan To Cash A/c £175 31st Jan By balance c/d £175
Total £175 Total £175
(b)Trial Balance of Pendo at 30th April
Account Debit Credit
Cash A/c 4025
Capital A/c 5000
Motor Van A/c 600
Purchase A/c 1300
Sergei's Loan A/c 650
Motor Van Expense A/c 200
Sales A/c 800
Storage Expense A/c 150
Drawings A/c 175
Total 6450 6450
(c)Financial statements of Pendo for the month ended 31st Jan
Statement of Profit & Loss of Pendo for the month ended 31st Jan
Sales 800
less: COGS 500
Gross Profit 300
7

less:operating expenses
motor van expenses 200
storage expenses 150
350
Loss -50
TASK 3
Journal Entries
Date Particulars Debit Credit
2nd Jan Harvey A/c Dr. £124
To Sales A/c £124
5th Jan Wages A/c Dr. £12
To Cash A/c £12
5th Jan Purchase A/c Dr. £150
To Rich A/c £150
7th Jan Cash A/c Dr. £18
To Smith A/c £18
9th Jan Max A/c Dr. £21
To Cash A/c £21
11th Jan Cash A/c Dr. £64
To Sales A/c £64
14th Jan Wages A/c Dr. £14
To Cash A/c £14
14th Jan Purchase A/c Dr. £75
To Cash A/c £75
15th Jan Rich A/c Dr. £162
To Cash A/c £162
20th Jan Office Desk A/c Dr. £32
To Cash A/c £32
8

21st Jan Wages A/c Dr. £17
To Cash A/c £17
21st Jan Cash A/c Dr. £110
To Sales A/c £110
23rd Jan Office Expenses A/c Dr. £3
To Cash A/c £3
23rd Jan Cash A/c Dr. £25
To Harvey A/c £25
28th Jan Cash A/c Dr. £84
To Sales A/c £84
28th Jan Wages A/c Dr. £15
To Cash A/c £15
31st Jan Cash A/c Dr. £30
To Sales A/c £30
Harvey A/c -
Date Particulars Amount Date Particulars Amount
1st Jan To balance b/d £39 23rd Jan By Cash £25
2nd Jan To Sales A/c £124
31st Jan By balance c/d £138
Total £163 Total £163
Sales A/c -
Date Particulars Amount Date Particulars Amount
31st Jan To balance c/d £412 2nd Jan By Harvey A/c £124
11th Jan By Cash A/c £64
21st Jan By Cash A/c £110
28th Jan By Cash A/c £84
31st Jan By Cash A/c £30
9

Total £412 Total £412
Wages A/c -
Date Particulars Amount Date Particulars Amount
5th Jan To Cash A/c £12 31st Jan By balance c/d £58
14th Jan To Cash A/c £14
21st Jan To Cash A/c £17
28th Jan To Cash A/c £15
Total £58 Total £58
Cash A/c -
Date Particulars Amount Date Particulars Amount
1st Jan To balance B/d £343 5th Jan By Wages £12
7th Jan To Smith £18 9th Jan By Max £21
11th Jan To Sales £64 14th Jan By Wages £14
21st Jan To Sales £110 15th Jan By Rich £162
23rd Jan To Harvey £25 20th Jan By Office Desk £32
28th Jan To Sales £84 21st Jan By Wages £17
Purchase A/c -
Date Particulars Amount Date Particulars Amount
05/01/18 To Rich 150 31 st Jan By balance c/d 225
14/01/18 To Cash 75
Total 225 Total 225
Rich A/c -
Date Particulars Amount Date Particulars Amount
15/01/18 To Cash 162 1st Jan By balance b/d 12
10

5th Jan By Purchase 150
Total 162 Total 162
Smith A/c -
Date Particulars Amount Date Particulars Amount
1st Jan To balance B/d 18 7th Jan By Cash 18
Total 18 Total 18
Max A/c -
Date Particulars Amount Date Particulars Amount
9th Jan To Cash 21 1st Jan By balance b/d 21
Total 21 21
Wages A/c -
Date Particulars Amount Date Particulars Amount
5th Jan To Cash 12 31st Jan By balance c/d 58
14th Jan To Cash 14
21st Jan To Cash 17
28th Jan To Cash 15
Total 58 Total 58
Office Desk A/c -
Date Particulars Amount Date Particulars Amount
20th Jan To Cash 32 31st Jan By balance c/d 32
11

Total 32 Total 32
Office Expense A/c -
Date Particulars Amount Date Particulars Amount
23rd Jan To Cash A/c 3 31st Jan By balance c/d 3
Total 3 Total 3
Furniture A/c -
Date Particulars Amount Date Particulars Amount
1st Jan To balance b/d 198 31st Jan By balance c/d 198
Total 198 Total 198
Moon A/c -
Date Particulars Amount Date Particulars Amount
1st Jan To balance b/d 26 31st Jan By balance c/d 26
Total 26 Total 26
Inventory A/c -
Date Particulars Amount Date Particulars Amount
1st Jan To balance b/d 458 31st Jan By COGS 84
31st Jan By balance c/d 374
(b)Trial Balance of Mafuta at 31st Jan
Account Debit Credit
12

Cash A/c 323
Sales A/c 412
Wages a/c 58
Office expense a/c 3
Office desk A/c 32
Harvey A/c 138
Purchase A/c 225
Inventory A/c 374
furniture and fittings 198
Moon A/c 26
Capital (Balancing figure) 965
Total 1377 1377
(c) Financial Statements of Mafuta Ltd. For the year ended 31st Jan
Statement of Profit & Loss for the month ended 30th April
Particulars Amount (£)
sales 412
less: COGS 309
Gross profit 103
Expenses
Office expense 3
wages 58
Operating profit 42
Working Note :
opening stock 458
Add: Purchase 225
Less: closing stock 374
Cost of goods sold 309
13

Statement of Financial Position for the month ended 30th April
Assets Amount Liabilities Amount
Fixed assets capital 965
furniture and fittings 198 Add: Net profit 42
Office desk 32 bank O/d 84
current assets
cash 323
Inventory 374
debtors
Harvey 138
Moon 26
Total 1091 Total 1091
TASK 4
Journal Entries
Date Journal Entry Debit Credit
2nd June Claire A/c Dr. £425
To Sales A/c £425
13th June Purchase A/c Dr. £12000
To Discount Received A/c £840
To Georgine A/c £11160
14th June Hywel A/c Dr. £8550
Trade A/c Dr. £450
To Sales A/c £9000
20th June Jane A/c Dr. £6000
To Cash A/c £6000
14

21st June Purchases A/c Dr. £4500
To Discount Received A/c £90
To Andrew A/c £4410
22nd June Sales Return A/c Dr. £1000
To Clarie A/c £1000
24th June Mandy A/c Dr. £4850
Discount Payable A/c Dr. £150
To Sales A/c £5000
24th June Cash A/c Dr. £7075
Discount Payable A/c Dr. £425
To Claire A/c £7500
25th June Cash A/c Dr. £8550
To Hywel A/c £8550
25th June Georgina A/c Dr. £11160
To Ricardo A/c £11160
27th June Andrew A/c Dr. £4410
To Ricardo A/c £4410
Cash A/c -
Date Particulars Amount Date Particulars Amount
24th June To Clarie A/c £8075 20th June By Jane A/c £6000
25th June To Hywel A/c £9000 By balance c/d £11075
Total £17075 Total £17075
15

Sales A/c -
Date Particulars Amount Date Particulars Amount
27th June To balance
c/d
£14700 2nd June By Claire A/c £425
14th June By Hywel A/c £8550
14th June By trade A/c £450
24th June By Mandy
A/c
£4850
24th June By discount
A/c
£425
Total £14700 Total £14700
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