Ledger Accounts, Trial Balance, Profit and Loss Account and Balance Sheet for the Firm of Mafuta

This document provides ledger accounts, trial balance, profit and loss account, and balance sheet for the firm of Mafuta. It includes journal entries, sales, purchases, expenses, and cash transactions.

Accounting
Fundamentals-1

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
TASK 2............................................................................................................................................4
Sergei A/c.........................................................................................................................................7
Task 3...............................................................................................................................................8
Ledger accounts, trial balance, profit ad loss account and balance sheet for the firm of Mafuta
.....................................................................................................................................................8
Financial statements..................................................................................................................12
TASK 4..........................................................................................................................................13
Ledger accounts and trial balance of firm of sole trader...........................................................13
Ledger accounts, trial balance, profit ad loss account and balance sheet for the firm of Mafuta
...................................................................................................................................................16
Financial statements..................................................................................................................16
TASK 4..........................................................................................................................................16
Ledger accounts and trial balance of firm of sole trader...........................................................16
TASK 5..........................................................................................................................................18
Differentiation between the revenue expenditure and the capital expenditure with reference
international accounting standards............................................................................................18
CONCLUSION..............................................................................................................................19
REFERENCES..............................................................................................................................20
Online........................................................................................................................................20
Capital and Revenue Expenditure. 2017. [Online]Available through:<https://accounting-
simplified.com/financial/fixed-assets/capital-and-revenue-expenditure.html>.............................20
ng....................................................................................................................................................20
Absorption Costing........................................................................................................................20
Absorption Costing........................................................................................................................20

INTRODUCTION
Fundamental of accounting refers to basic concept of accounting that provides guidelines
to prepare various financial statements of a business by analysing all the financial statements
and summerzing them (Sloan, 2019). Present statement shows preparation of fundamental
accounting using basic fundamental accounting concept. It also shows broad difference between
capital and revenue expenditure on the basis of International Accounting Standards.
TASK 1
A) Journal entries and journal entries in the books of Maxim
Date Particular Amount Amount
05/04/19 Cash a/c Dr. 300
To capital a/c 300
07/04/19 Purchase a/c Dr. 200
To cash a/c 200
08/04/19 Cash a/c Dr. 250
To loan a/c 250
15/04/19 Motor van a/c Dr. 150
To cash a/c 150
20/04/19 Cash a/c Dr. 350
To sales a/c 350
28/04/19 Rent a/c Dr. 200
To cash a/c 200
29/04/19 Loan a/c Dr. 200
To cash a/c 200
30/04/19 Drawings a/c dr. 60
To cash a/c 60
Cash Account
Date Particular Amount Date Particular Amount
05/04/19 To capital a/c 300 07/04/19 By purchase 200
1

08/04/19 To Loan A/c 250 15/04/19 By motor van 150
20/04/19 To sales a/c 350 28/04/19 By rent a/c 200
29/04/19 By loan a/c 200
30/04/19 By drawings 60
By balance c/d 90
900 900
Capital A/c
Date Particular Amount Date Particular Amount
30/04/19 To Balance c/d 300 05/04/19 By cash A/c 300
300 300
Purchase A/c
Date Particular Amount Date Particular Amount
07/04/19 To cash a/c 200 By balance c/d 200
200 200
Loan A/c
Date Particular Amount Date Particular Amount
29/04/19 To cash a/c 200 04/04/19 By cash a/c 250
30/04/19 To balance c/d 50
250 250
Sales A/c
Date Particular Amount (£) Date Particular
30/04/19 To balance c/d 350 20/04/18 By cash A/c 350
350 350
2

Rent A/c
Date Particular Amount (£) Date Particular Amount
28/04/19 To cash A/c 50 30/04/18 By balance c/d 50
50 50
Drawings A/c
Date Particular Amount (£) Date Particular Amount
30/04/18 To cash 60 30/04/18 By balance c/d 60
60 60
Motor Van A/c
Date Particular Amount (£) Date Particular Amount
15/04/18 To cash 150 30/04/18 By balance c/d 150
150 150
3

B) Trial balance in the books of Maxim
Trial balance in the books of Maxim as on 30 April
Accounts Debit balance Credit balance
Cash A/c 240
Purchase A/c 200
Loan A/c 50
Motor van A/c 150
Capital A/c 300
Sales A/c 350
Drawing A/c 60
Rent A/c 50
Total 700 700
C) Preparation of financial statements in the books of Maxim
Statement showing Profit and Loss of Maxim
Particular Amount
sales
Less:COGS
Gross profit
Less: Rent
Less :Drawings
Operating profit /net profit
Statement showing financial position of the company
Liabilities Amount Assets Amount
Stakeholders equity Current assets
capital 300 inventories 100
Drawings (60) cash 240
net profit 140 Fixed assets
4

Stakeholders equity 380 Motor van 150
loan 250
Repaid part of loan (200)
50
Total 490 Total 490
TASK 2
A) Journal entries Ledger Accounts in the books if Pendo Company
Journal in the books of Pendo Company for the period 1/01/19 to 31/01/19
Date Particulars Debit amount
( £)
Credit amount
(£)
1/01/19 Cash A/c 5000
To Capital A/c 5000
2/01/19 Motor Van expenses A/c 600
To cash a/c 600
3/01/19 Purchase A/c 1300
To Cash A/c 1300
4/01/19 Cash A/c 1000
To loan A/c 1000
10/01/19 Motor Van expenses A/c 200
To Cash A/c 200
13/01/19 Cash A/c 300
To sales A/c 300
20/01/19 Cash A/c 500
To sales A/c 500
24/01/19 storage expenses A/c 150
To cash A/c 150
27-Jan loan A/c 350
To cash A/c 350
30-Jan Drawing A/c 175
To cash A/c 175
Ledgers in the books of Pendo company
Cash A/c
Date Particulars Amount Date Particulars Amount
5

1/01/19 To capital A/c 5000 2/01/19 By Motor Van
A/c 600
4/01/19 To Sergei A/c 1000 3-/01/19 By purchases
A/c 1300
13/01/19 To Sales A/c 300 10/01/19 By Motor Van
expenses A/c 200
20/01/19 To sales A/c 500 24/01/19 By Storage
expenses A/c 150
27-/01/19 By loan A/c 350
30/01/19 By Drawings
A/c 175
By Balance c/d 4025
6800 6800
Motor Van A/c
Date Particulars Amount Date Particulars Amount
2/01/19 To Cash A/c 600 31/01/1
9
By balance c/d 600
600 600
Expenses A/c
Date Particulars Amount Date Particulars Amount
10/01/19 To Cash A/c 200 31/01/
19
By balance c/d 350
24/01/19 To Cash A/c 150
350 350
Sales A/c
Date Particulars Amount Date Particulars Amount
31/01/19 To balance
c/d
800 13/01/19 By Cash A/c 300
20/01/19 By cash A/c 500
800 800
Purchase A/c
Date Particulars Amount Date Particulars Amount
3/01/19 To Cash A/c 1300 31/01/1
9
By balance c/d 1300
6

1300 1300
Loan A/c
Date Particulars Amount Date Particulars Amount
27/01/19 To Cash A/c 350 4/01/19 By cash A/c 1000
31/01/19 To balance c/d 650
1000 1000
Capital A/c
Date Particulars Amount Date Particulars Amount
1/01/19 To Cash A/c 5000 31/01/1
9
By balance c/d 5000
5000 5000
Drawing A/c
Date Particulars Amount Date Particulars Amount
30/01/19 To Cash A/c 175 31/01/1
9
By balance c/d 175
175 175
Sergei A/c
Date Particulars Amount Date Particulars Amount
To balance c/d 1000 4-Jan By Cash A/c 1000
1000 1000
Trail balance in the books of Pendo company for the period ending 31 Jan 2018
Account Name Debit Amount Credit Amount
Cash A/c 4025
Loan A/c 650
motor van A/c 600
Sales A/c 800
Drawing A/c 175
7

Capital A/c 5000
Purchases A/c 1300
Expenses A/cs 350
Total 6450 645
Statement of profit and loss accounts in the books of Pando for the month ending on 31 Jan
2019
Particulars Amount Amount
sales 800
Less: cost of goods sold 500
Gross Profit 300
Less: Operating overheads
Motor van expenses 200
Storage expenses 150
350
Net Operating loss 50
Working notes
Calculation of cost of goods sold
Particulars Amount
Opening stock 0
Add: purchases 1300
Less: closing stock 800
Cost of goods sold 500
8

Task 3
Ledger accounts, trial balance, profit ad loss account and balance sheet for the firm of Mafuta
Date Journal entry Debit (£) Credit(£)
02/01/19 Harvey A/c Dr. 124
To sales A/c Cr. 124
05/01/19 Wages A/c Dr. 12
To cash A/c Cr. 12
05/01/19 Purchase A/c Dr 150
To Rich A/c Cr. 150
07/01/19 Cash A/c Dr. 18
To Smith A/c Cr. 18
09/01/19 Max A/c Dr. 21
To cash A/c Cr. 21
11/01/19 Cash A/c Dr. 64
To sales A/c Cr. 64
14/01/19 Wages A/c Dr. 14
To cash A/c Cr. 14
14/01/19 Purchase A/c Dr. 75
To cash A/c Cr. 75
15/01/19 Rich A/c Dr. 162
To cash A/c Cr. 162
20/01/19 Office Desk A/c Dr. 32
To cash A/c Cr. 32
21/01/19 Wages A/c Dr. 17
To cash a/c Cr 17
21/01/19 Cash A/c Dr. 110
To sales A/c Cr. 110
23/01/19 Office expenses A/c Dr. 3
9

To cash A/c Cr. 3
23/01/19 Cash A/c Dr. 25
To Harvey A/c Cr. 25
28/01/18 Cash A/c Dr. 84
To sales A/c Cr. 84
28/01/18 Wages A/c Dr. 15
To cash A/c Cr. 15
31/01/18 Cash A/c Dr. 30
To sales A/c Cr. 30
Sales A/c
Date Particulars Amount (£) Date Particulars Amount (£)
31/01/18To balance c/d 412 02/01/18By Harvey 124
11/01/18By cash 64
21/01/18By cash 110
28/01/18By cash 84
31/01/18By cash 30
Total 412 Total 412
Cash A/c
Date Particulars Amount (£) Date Particulars Amount (£)
01/01/18To balance B/d 343 05/01/18By wages 12
07/01/18To smith 18 09/01/18By Max 21
11/01/18To sales 64 14/01/18By wages 14
21/01/18To sales 110 15/01/18By Rich 162
23/01/18To Harvey 25 20/01/18By office desk 32
28/01/18To sales 84 21/01/18By wages 17
31/01/18To sales 30 23/01/18By office expense 3
28/01/18By wages 15
10

14/01/18By purchase 75
31/01/18By balance c/d 323
Total 674 Total 674
Wages A/c
Date Particulars Amount (£) Date Particulars Amount (£)
05/01/18To cash 12 31/01/18By balance c/d 58
14/01/18To cash 14
21/01/18To cash 17
28/01/18To cash 15
Total 58 Total 58
office expense A/c
Date Particulars Amount (£) Date Particulars Amount (£)
23/01/18To cash A/c 3 31/01/18By balance c/d 3
Total 3 Total 3
Office desk A/c
Date Particulars Amount (£) Date Particulars Amount (£)
20/01/18To cash 32 31/01/18By balance c/d 32
11

Total 32 Total 32
Harvey A/c
Date Particulars Amount (£) Date Particulars Amount (£)
01/01/18To balance B/d 39 23/01/18By cash 25
02/01/18To sales 124
31/01/18By balance c/d 138
Total 163 Total 163
Rich A/c
Date Particulars Amount (£) Date Particulars Amount (£)
15/01/18To cash 162 01/01/18By balance b/d 12
05/01/18By purchase 150
Total 162 Total 162
Max A/c
Date Particulars Amount (£) Date Particulars Amount (£)
09/01/18To cash 21 01/01/18By balance b/d 21
Total 21 21
Purchase A/c
Date Particulars Amount (£) Date Particulars Amount (£)
05/01/18To Rich 150 31/01/18By balance c/d 225
14/01/18To cash 75
Total 225 Total 225
12

inventory A/c
Date Particulars Amount (£) Date Particulars Amount (£)
01/01/18 To balance B/d 458 31/01/18 By COGS 84
31/01/18 By balance c/d 374
Total 458 Total 458
Furniture and fitting A/c
Date Particulars Amount (£) Date Particulars Amount (£)
01/01/18 To balance b/d 198 31/01/18By balance c/d 198
Total 198 Total 198
Moon a/c
Date Particulars Amount (£) Date Particulars Amount (£)
01/01/18To balance B/d 26 31/01/18By balance c/d 26
Total 26 Total 26
Smith A/c
Date Particulars Amount (£) Date Particulars Amount (£)
01/01/18To balance B/d 18 07/01/18By cash 18
Total 18 Total 18
Trial balance at the month ended 31 January
Particulars Debit credit
Cash A/c 323
13

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
Financial statements
Profit and Loss for the month ended 31 January
Particular Amount (£)
sales 412
less: COGS 309
Gross profit 103
Expenses
Office expense 3
wages 58
Operating profit /net profit 42
working note
Particulars Amount
opening stock 458
Add: Purchase 225
14

Less: closing stock 374
Cost of goods sold 309
Balance sheet for the Month Ended 31 January
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
Ledger accounts and trial balance of firm of sole trader
JOURNAL ENTRIES
Date Particulars Debit(£) Credit (£)
02/06/18 Claire a/c 425
To sales 425
13/06/18 Purchase a/c 12000
To discount received 840
To Georgine 11160
14/06/18 Hywel a/c 8550
To Trade a/c 450
15

To sales 9000
20/06/18 Jane a/c 6000
To cash 6000
21/06/18 Purchase a/c 4500
To discount received 90
To Andrew 4410
22/06/18 Sales return a/c 1000
To Claire 1000
24/06/18 Mandy a/c 4850
Discount payable a/c 150
To sales 5000
24/06/18 cash a/c 7075
Discount payable a/c 425
To Claire 7500
25/06/18 cash a/c 8550
To Hywel a/c 8550
25/06/18 Georgina a/c 11160
To Ricardo 11160
27/06/18 Andrew a/c 4410
To Ricardo 4410
CASH ACCOUNT
Date Particulars Amount Date Particulars Amount
24/06/18 To clarie 8075 20/06/18 By Jane 6000
25/06/18 To Hywel 9000 By balance c/d 11075
16

Total 17075 Total 17075
CLAIRE ACCOUNT
Date Particulars Amount Date Particulars Amount
02/06/18 To sales 425 22/06/18 By sales return 1000
To discount
To balance c/d 8075 24/06/18 By cash 7075
24/06/18
Total 8500 Total 8075
SALES ACCOUNT
Date Particulars Amount Date Particulars Amount
To balance c/d 14700 02/06/18 By claire 425
14/06/18 By Hywel 8550
14/06/18 By trade 450
24/06/18 By Mandy 4850
24/06/18 By discount 425
Total 14700 Total 14700
PURCHASE ACCOUNT
Date Particulars Amount Date Particulars Amount
13/06/18 To discount received 840 By balance c/d 16500
13/06/18 To georgine 11160
21/06/18 To discount received 90
21/06/18 To Andrew 4410
Total 16500 Total 16500
17

GEORGINA ACCOUNT
Date Particulars Amount Date Particulars Amoun
t
16/06/18 To discount received 840 13/06/18 By purchases 12000
25/06/18 To Ricardo 11160 By cash 9000
Total 12000 Total 12000
HYWEL ACCOUNT
Date Particulars Amount Date Particulars Amount
14/06/18 To sales 9000 14/06/18 By trade 450
By cash 8550
Total 9000 Total 9000
JANE ACCOUNTTask 3
Ledger accounts, trial balance, profit ad loss account and balance sheet for the firm of Mafuta
Date Journal entry Debit (£) Credit(£)
02/01/19 Harvey A/c Dr. 124
To sales A/c Cr. 124
05/01/19 Wages A/c Dr. 12
To cash A/c Cr. 12
05/01/19 Purchase A/c Dr 150
To Rich A/c Cr. 150
07/01/19 Cash A/c Dr. 18
To Smith A/c Cr. 18
09/01/19 Max A/c Dr. 21
To cash A/c Cr. 21
11/01/19 Cash A/c Dr. 64
18

To sales A/c Cr. 64
14/01/19 Wages A/c Dr. 14
To cash A/c Cr. 14
14/01/19 Purchase A/c Dr. 75
To cash A/c Cr. 75
15/01/19 Rich A/c Dr. 162
To cash A/c Cr. 162
20/01/19 Office Desk A/c Dr. 32
To cash A/c Cr. 32
21/01/19 Wages A/c Dr. 17
To cash a/c Cr 17
21/01/19 Cash A/c Dr. 110
To sales A/c Cr. 110
23/01/19 Office expenses A/c Dr. 3
To cash A/c Cr. 3
23/01/19 Cash A/c Dr. 25
To Harvey A/c Cr. 25
28/01/18 Cash A/c Dr. 84
To sales A/c Cr. 84
28/01/18 Wages A/c Dr. 15
To cash A/c Cr. 15
31/01/18 Cash A/c Dr. 30
To sales A/c Cr. 30
Sales A/c
Date Particulars Amount (£) Date Particulars Amount (£)
31/01/18To balance c/d 412 02/01/18By Harvey 124
11/01/18By cash 64
21/01/18By cash 110
19

28/01/18By cash 84
31/01/18By cash 30
Total 412 Total 412
Cash A/c
Date Particulars Amount (£) Date Particulars Amount (£)
01/01/18To balance B/d 343 05/01/18By wages 12
07/01/18To smith 18 09/01/18By Max 21
11/01/18To sales 64 14/01/18By wages 14
21/01/18To sales 110 15/01/18By Rich 162
23/01/18To Harvey 25 20/01/18By office desk 32
28/01/18To sales 84 21/01/18By wages 17
31/01/18To sales 30 23/01/18By office expense 3
28/01/18By wages 15
14/01/18By purchase 75
31/01/18By balance c/d 323
Total 674 Total 674
Wages A/c
Date Particulars Amount (£) Date Particulars Amount (£)
05/01/18To cash 12 31/01/18By balance c/d 58
14/01/18To cash 14
21/01/18To cash 17
28/01/18To cash 15
Total 58 Total 58
20

office expense A/c
Date Particulars Amount (£) Date Particulars Amount (£)
23/01/18To cash A/c 3 31/01/18By balance c/d 3
Total 3 Total 3
Office desk A/c
Date Particulars Amount (£) Date Particulars Amount (£)
20/01/18To cash 32 31/01/18By balance c/d 32
Total 32 Total 32
Harvey A/c
Date Particulars Amount (£) Date Particulars Amount (£)
01/01/18To balance B/d 39 23/01/18By cash 25
02/01/18To sales 124
31/01/18By balance c/d 138
Total 163 Total 163
Rich A/c
Date Particulars Amount (£) Date Particulars Amount (£)
15/01/18To cash 162 01/01/18By balance b/d 12
05/01/18By purchase 150
Total 162 Total 162
21

Max A/c
Date Particulars Amount (£) Date Particulars Amount (£)
09/01/18To cash 21 01/01/18By balance b/d 21
Total 21 21
Purchase A/c
Date Particulars Amount (£) Date Particulars Amount (£)
05/01/18To Rich 150 31/01/18By balance c/d 225
14/01/18To cash 75
Total 225 Total 225
inventory A/c
Date Particulars Amount (£) Date Particulars Amount (£)
01/01/18 To balance B/d 458 31/01/18 By COGS 84
31/01/18 By balance c/d 374
Total 458 Total 458
Furniture and fitting A/c
Date Particulars Amount (£) Date Particulars Amount (£)
01/01/18 To balance b/d 198 31/01/18By balance c/d 198
Total 198 Total 198
Moon a/c
22

Date Particulars Amount (£) Date Particulars Amount (£)
01/01/18To balance B/d 26 31/01/18By balance c/d 26
Total 26 Total 26
Smith A/c
Date Particulars Amount (£) Date Particulars Amount (£)
01/01/18To balance B/d 18 07/01/18By cash 18
Total 18 Total 18
Trial balance at the month ended 31 January
Particulars Debit credit
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
Financial statements
23

Profit and Loss for the month ended 31 January
Particular Amount (£)
sales 412
less: COGS 309
Gross profit 103
Expenses
Office expense 3
wages 58
Operating profit /net profit 42
working note
Particulars Amount
opening stock 458
Add: Purchase 225
Less: closing stock 374
Cost of goods sold 309
Balance sheet for the Month Ended 31 January
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
24

TASK 4
Ledger accounts and trial balance of firm of sole trader
JOURNAL ENTRIES
Date Particulars Debit(£) Credit (£)
02/06/18 Claire a/c 425
To sales 425
13/06/18 Purchase a/c 12000
To discount received 840
To Georgine 11160
14/06/18 Hywel a/c 8550
To Trade a/c 450
To sales 9000
20/06/18 Jane a/c 6000
To cash 6000
21/06/18 Purchase a/c 4500
To discount received 90
To Andrew 4410
22/06/18 Sales return a/c 1000
To Claire 1000
24/06/18 Mandy a/c 4850
Discount payable a/c 150
To sales 5000
24/06/18 cash a/c 7075
25

Discount payable a/c 425
To Claire 7500
25/06/18 cash a/c 8550
To Hywel a/c 8550
25/06/18 Georgina a/c 11160
To Ricardo 11160
27/06/18 Andrew a/c 4410
To Ricardo 4410
Date Particulars Amount Date Particulars Amoun
t
20/06/18 To cash 6000 By balance c/d 6000
Total 6000 Total 6000
ANDREW ACCOUNT
Date Particulars Amount Date Particulars Amount
27/06/18 To ricardo 4410 21/06/18 By purchases 4500
21/06/18 To discount received 90
Total 4500 Total 4500
SALES RETURN ACCOUNT
Date Particulars Amount Date Particulars Amount
22/06/18 To clarie 1000 By balance c/d 1000
Total 1000 Total 1000
MANDY ACCOUNT
26

Date Particulars Amount Date Particulars Amount
24/06/18 To sales 5000 24/06/18 By discount 150
By balance c/d 4850
Total 5000 Total 5000
RICARDO ACCOUNT
Date Particulars Amount Date Particulars Amount
To balance c/d 15570 25/06/18 By georgina 11160
27/06/18 By andrew 4410
Total 15570 Total 15570
TRADE ACCOUNT
Date Particulars Amount Date Particulars Amount
14/06/18 To sales 9000 14/06/18 By Hywel 8550
By balance c/d 450
Total 9000 Total 9000
DISCOUNT RECEIVED ACCOUNT
Date Particulars Amount Date Particulars Amount
21/06/18 To Andrew 4410 21/06/18 By purchases 4500
13/06/18 To Georgina 11160 13/06/18 By purchases 12000
To balance c/d 930
Total 16500 Total 16500
DISCOUNT PAYABLE ACCOUNT
Date Particulars Amount Date Particulars Amount
24/06/18 To clarie 7500 24/06/18 By cash 7075
24/06/18 To sales 5000 24/06/18 By mandy 4850
27

By balance c/d 575
Total 12500 Total 12500
Trial balance of Ricardo for the month ended June
Particulars Debit(£) Credit (£)
cash 11075
sales 14700
purchases 16500
discount allowed 575
trade 450
Ricardo 15570
Mandy 4850
Sales return 1000
Jane 6000
discount received 930
Capital (balancing figure) 40390
Total 56020 56020
TASK 5
Differentiation between the revenue expenditure and the capital expenditure with reference
international accounting standards
Capital expenditure is basically assumed to be consumed over useful life if the fixed
assets. Whereas revenue expenditure is assumed to be consumed within a short period.
According to the international accounting standards there are some differences between the
capital and revenue expenditure and are explained as follows:-
Capital expenditure Revenue expenditure
28

 Capital expenditure includes the cost
which is incurred on acquisition of the
fixed assets(Tayeh, Al-Jarrah and
Tarhini, 2015).
 it does not only include the cost of
purchase it also includes the additional
cost which incurred to bring the asset in
working condition
 This is the expenditure which resulting
in improving earning capacity of the
business.
 Expenditures incurred to improve the
position of the asset and business.
 Portion of expenditure that is
depreciation is shown in trading and
P&L account and balance is shown in
asset side of balance sheet.
 This includes purchase costs, delivery
costs, legal charges, installation
charges, up gradation charges,
replacements cost(Akhmetshin and
Osadchy, 2015).
 Revenue expenditure incurred on fixed
assets which incudes the cost of
maintenance.
 These costs incurred on regular basis
for maintaining and repairing the asset.
 They are aimed at maintaining instated
of improving the earning capacity of
business.
 Expenditure is incurred on the
extension and addition of the existing
fixed assets(Capital and Revenue
Expenditure, 2017).
 Revenue expenditure is shown in
trading and p&L account or income
statement.
 These costs comprise repair costs,
maintenance charges, repainting costs,
renewal expenses
CONCLUSION
From the above analysis, it can be concluded that fundamental accounting concept can be
used for preparation of financial statements of a company. Further, it has been seen that using
these concepts in different situations would provide different results. At the end, it has also
concluded that in the International Accounting Standard, expenses has been categorised in two
major categories i.e. revenue expenditure and capital expenditure.
29

REFERENCES
Books and Journals
Sloan, R. G., 2019. Fundamental analysis redux. The Accounting Review. 94(2). pp.363-377.
Tayeh, M., Al-Jarrah, I. M. and Tarhini, A., 2015. Accounting vs. market-based measures of firm
performance related to information technology investments. International Review of
Social Sciences and Humanities. 9(1). pp.129-145.
Akhmetshin, E. M. and Osadchy, E. A., 2015. New requirements to the control of the
maintenance of accounting records of the company in the conditions of the economic
insecurity. International Business Management. 9(5). pp.895-902.
Online
Capital and Revenue Expenditure. 2017. [Online]Available through:<https://accounting-
simplified.com/financial/fixed-assets/capital-and-revenue-expenditure.html>
ng
Absorption Costing
Absorption Costing
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