Comparison of Capital and Revenue Expenditures

This assignment provides an analysis of capital and revenue expenditures, highlighting their distinct characteristics. Capital expenditures involve significant investments for fixed assets, while revenue expenditures are recurring costs related to normal business activities. The study concludes that these expenses have different impacts on profit and loss accounts, with capital expenditures having a more substantial effect. The assignment also emphasizes the importance of understanding accounting concepts in preparing financial statements.

ACCOUNTING
FUNDAMENTALS

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
A) Preparation of journal and ledger accounts for Maxim .........................................................1
B) Preparing trial balance for Maxim..........................................................................................3
C) Statement for profit and loss and financial position for Maxim.............................................3
TASK 2............................................................................................................................................4
A) Preparation of ledger account of Pendo..................................................................................4
B) Preparation of trial balance of Pendo......................................................................................6
C) preparing profit and loss account of Pendo.............................................................................7
TASK 3............................................................................................................................................7
A) Preparation of ledger accounts for Mafuta.............................................................................7
B)Preparing trial balance of Mafuta..........................................................................................11
C) Preparation of financial statements for Mafuta.....................................................................11
TASK 4..........................................................................................................................................12
Papering accounting statements for Ricardo .............................................................................12
TASK 5..........................................................................................................................................17
Demonstrating difference between revenue expenditure and capital expenditure....................17
CONCLUSION..............................................................................................................................19
REFERENCES..............................................................................................................................20

INTRODUCTION
Fundamental accounting is a set of concepts that are needed to be taken into account at
the time of preparing financial statements and recording each of the monitory transaction made
by the company (Schaltegger and Burritt, 2017). Present study represents preparation of journal
and ledger accounts of different business organisations. Preparation of balance sheet, statement
of profit and loss account of various business organisations is shown in the study. Furthermore, it
also shows a brief description about difference between revenue expenditures and capital
expenditure in context to international accounting standards.
TASK 1
A) Preparation of journal and ledger accounts for Maxim
Date Journal entry Debit (£) Credit(£)
05/04/19 Cash Account Dr 300
To capital Account 300
07/04/19 Purchase Account Dr 200
To cash Account 200
08/04/19 Cash Account Dr 250
To loan Account 250
15/04/19 Motor van Account Dr 150
To cash Account 150
20/04/19 Cash Account Dr 350
To sales Account 350
28/04/19 Rent Account Dr 50
To Cash Account 50
29/04/19 Loan Account Dr 200
To cash Account 200
30/04/19 Drawing Account Dr 60
To cash Account 60
Cash A/c
Date Particular Amount Date Particular Amount (£)
1

(£)
05/04/19 To capital
Account
300 07/04/19 By purchase
Account
200
08/04/19 To loan Account 250 15/04/19 By Motor van
Account
150
20/04/19 To sales
Account
350 28/04/19 By rent Account 50
29/04/19 By loan Account 200
30/04/19 By Drawing
Account
60
30/04/19 By balance c/d 240
900 900
Loan A/c
Date Particular Amount
(£)
Date Particular Amount (£)
29/04/19 To cash Account 200 08/04/19 By cash Account 250
30/04/19 To balance c/d 50
250 250
Drawing A/c
Date Particular Amount
(£)
Date Particular Amount (£)
30/04/19 To cash Account 60 30/04/19 By balance c/d 60
60 60
Purchase A/c
Date Particular Amount
(£)
Date Particular Amount (£)
07/04/19 To cash Account 200 30/04/19 By balance c/d 200
2

200 200
Capital A/c
Date Particular Amount
(£)
Date Particular Amount (£)
30/04/19 To balance c/d 300 05/04/19 By cash account 300
300 300
Rent A/c
Date Particular Amount
(£)
Date Particular Amount (£)
28/04/18 To cash account 50 30/04/18 By balance c/d 50
50 50
Motor van A/c
Date Particular Amount
(£)
Date Particular Amount (£)
15/04/19 To cash Account 150 30/04/19 By balance c/d 150
150 150
Sales A/c
Date Particular Amount (£) Date Particular Amount (£)
30/04/19 To balance c/d 350 20/04/19 By cash 350
350 350
B) Preparing trial balance for Maxim
Trial balance of Maxim as on 30 April 2019
Account Title Debit Credit
Cash Account 240
Purchase Account 200
3

Loan Account 50
Motor van Account 150
Capital Account 300
Sales Account 350
Drawing Account 60
rent Account 50
Total 700 700
C) Statement for profit and loss and financial position for Maxim
Profit and Loss for the month ended 30 April
Particular Amount (£)
sales 350
Less: Cost of goods sold 100
Gross profit 250
Less: Rent paid 50
net profit 200
Working notes
Particulars Amount
opening stock 0
Add: Purchases 200
Less: closing stock 100
Cost of goods sold 100
Statement of financial position as on 30 April
Assets Amount Liabilities Amount
Non current assets capital 300
Motor van 150 Less : Drawings 60
Current assets Add: net profit 200
inventory 100 380
cash 240 loan 250
Less : repaid 200
4

50
Total 490 Total 490
TASK 2
A) Preparation of ledger account of Pendo
Journal account for Pendo
DATE PARTICULARS DEBIT( £) CREDIT (£)
01/01/19 Cash Account 5000
To Capital Account 5000
02/01/19 Motor Van expenses Account 600
To cash Account 600
03/01/19 Purchase Account 1300
To Cash Account 1300
04/01/19 Cash Account 1000
To loan Account 1000
10/01/19 Motor Van expenses Account 200
To Cash Account 200
13/01/19 Cash Account 300
To sales Account 300
20/01/19 Cash Account 500
To sales Account 500
24/01/19 storage expenses Account 150
To cash Account 150
27/01/19 loan Account 350
To cash Account 350
30/01/19 Drawing Account 175
To cash Account 175
SALES ACCOUNT
DATE PARTICULA
RS
AMOUNT DATE PARTICULA
RS
AMOUNT
To balance
c/d
800 13/01/19 By Cash
Account
300
20/01/19 By cash
Account
500
800 800
CASH ACCOUNT
DATE PARTICUL
ARS AMOUNT DATE PARTICUL
ARS AMOUNT
5

01/01/19 To capital
Account 5000 02/01/19 By Motor
Van Account 600
04/01/19 To Sergei
Account 1000 03/01/19 By purchases
Account 1300
13/01/19 To Sales
Account 300 10/01/19
By Motor
Van expenses
Account
200
20/01/19 To sales
Account 500 24/01/19
By Storage
expenses
Account
150
27/01/19 By loan
Account 350
30/01/19 By Drawings
Account 175
31/01/19 By Balance
c/d 4025
6800 6800
PURCHASE ACCOUNT
DATE PARTICULAR
S
AMOUN
T
DATE PARTICULAR
S
AMOUNT
03/01/19 To Cash 1300 31/01/1
9
By balance c/d 1300
1300 1300
MOTOR VAN
DATE PARTICULAR
S
AMOUN
T
DATE PARTICULAR
S
AMOUNT
02/01/19 To Cash 600 31//01/
19
By balance c/d 800
10/01/19 To storage
expenses
account
200
800 800
EXPENSES ACCOUNT
DATE PARTICULAR
S
AMOUN
T
DATE PARTICULAR
S
AMOUNT
31/01/
19
By balance c/d 150
24/01/19 To Cash 150
150 150
CAPITAL ACCOUNT
DATE PARTICULAR
S
AMOUN
T
DATE PARTICULAR
S
AMOUNT
01/01/19 To Cash 5000 31/01/1
9
By balance c/d 5000
6

5000 5000
LOAN ACCOUNT
DATE PARTICULAR
S
AMOUN
T
DATE PARTICULAR
S
AMOUNT
27/01/19 To Cash
Account
350 By cash Account 1000
31//01/19 To balance c/d 650
1000 1000
SERGEI ACCOUNT
DATE PARTICULAR
S
AMOUN
T
DATE PARTICULAR
S
AMOUNT
To balance c/d 1000 04/01/1
9
By Cash 1000
1000 1000
DRAWING ACCOUNT
DATE PARTICULAR
S
AMOUN
T
DATE PARTICULAR
S
AMOUN
T
30//01/19 To Cash 175 31//01/
19
By balance c/d 175
175 175
B) Preparation of trial balance of Pendo
Trial Balance of Pendo for the month ending on 31 January 2019
Accounting Heads Debit Credit
1 Cash Account 4025
2 Sales Account 800
3 motor van Account 800
4 Loan Account 650
5 Purchases Account 1300
6 Expenses Account 150
7 Drawing Account 175
8 Capital Account 5000
Total 6450 6450
C) preparing profit and loss account of Pendo
Statement of profit and loss account for the month ended 31 January
7

sales 800
less: COGS 500
Gross Profit 300
less:operating expenses
motor van expenses 200
storage expenses 150
350
Operating profit/ Net profit/ loss -50
Working note:
calculation for Cost of goods sold
Particular Amount
opening stock 0
add: purchases 1300
less: closing stock 800
Total 500
statement of financial position
liabilities amount assets amount
current liabilities current assets
loan 650 cash 4025
debtors 700
non current
liabilities non current assets
capital 5000 motor van 800
less: drawing 175
less profit -50
5525 5525
8

TASK 3
A) Preparation of ledger accounts for Mafuta
Date Journal Debit (£) Credit(£)
02/01/19 Harvey Account Dr 124
To sales A/c 124
05/01/19 Wages Account Dr 12
To cash Account 12
05/01/19 Purchase Account Dr 150
To Rich Account 150
07/01/19 Cash Account Dr 18
To Smith Account 18
09/01/19 Max Account Dr 21
To cash Account 21
11/01/19 Cash Account Dr 64
To sales Account 64
14/01/19 Wages A/c Dr 14
To cash A/c 14
14/01/19 Purchase A/c Dr 75
To cash A/c 75
15/01/19 Rich A/c Dr 162
To cash A/c 162
20/01/19 office Desk A/c Dr 32
To cash A/c 32
21/01/19 Wages A/c Dr 17
To cash a/c Dr 17
21/01/19 Cash A/c Dr 110
To sales A/c 110
23/01/19 Office expenses A/c Dr 3
To cash A/c 3
9

23/01/19 Cash A/c Dr 25
To Harvey A/c 25
28/01/19 Cash A/c Dr 84
To sales A/c 84
28/01/19 Wages A/c Dr 15
To cash A/c 15
31/01/19 Cash A/c Dr 30
To sales A/c 30
Sales A/c
Date Particular Amount
(£)
Date Particular Amount (£)
31/01/19 To balance c/d 412 02/01/19 By Harvey
Account
124
11/01/19 By cash Account 64
21/01/19 By cash Account 110
28/01/19 By cash Account 84
31/01/19 By cash Account 30
412 412
office expense A/c
Date Particular Amount
(£)
Date Particular Amount (£)
23/01/19 To cash Account 3 31/01/19 By balance c/d 3
3 3
Cash A/c
Date Particular Amount
(£)
Date Particular Amount (£)
01/01/19 To balance B/d 343 05/01/19 By wages
Account
12
07/01/19 To smith Account 18 09/01/19 By Max Account 21
10

11/01/19 To sales Account 64 14/01/19 By wages
Account
14
21/01/19 To sales Account 110 15/01/19 By Rich Account 162
23/01/19 To Harvey
Account
25 20/01/19 By office desk
Account
32
28/01/19 To sales Account 84 21/01/19 By wages
Account
17
31/01/19 To sales Account 30 23/01/19 By office
expense Account
3
28/01/19 By wages
Account
15
14/01/19 By purchase
Account
75
31/01/19 By balance c/d 323
674 674
Wages A/c
Date Particular Amount
(£)
Date Particular Amount (£)
05/01/19 To cash Account 12 31/01/19 By balance c/d 58
14/01/19 To cash Account 14
21/01/19 To cash Account 17
28/01/19 To cash Account 15
58 58
Office desk A/c
Date Particular Amount
(£)
Date Particular Amount (£)
20/01/19 To cash Account 32 31/01/19 By balance c/d 32
11

32 32
Max A/c
Date Particular Amount
(£)
Date Particular Amount (£)
09/01/19 To cash Account 21 01/01/19 By balance b/d 21
21 21
Harvey A/c
Date Particular Amount
(£)
Date Particular Amount (£)
01/01/19 To balance B/d 39 23/01/19 By cash Account 25
02/01/19 To sales Account 124
31/01/18 By balance c/d 138
163 163
Purchase A/c
Date Particular Amount
(£)
Date Particular Amount
(£)
05/01/18 To Rich 150 31/01/18 By balance c/d 225
14/01/18 To cash 75
225 225
Rich A/c
Date Particular Amount
(£)
Date Particular Amount (£)
15/01/19 To cash 162 01/01/19 By balance b/d 12
05/01/19 By purchase 150
162 162
Furniture and fitting A/c
Date Particular Amount Date Particular Amount
12

(£) (£)
01/01/19 To balance b/d 198 31/01/19 By balance c/d 198
198 198
inventory A/c
Date Particular Amount
(£)
Date Particular Amount
(£)
01/01/18 To balance B/d 458 31/01/18 By Cost of goods
sold
84
31/01/18 By balance c/d 374
458 458
Moon a/c
Date Particular Amount
(£)
Date Particular Amount
(£)
01/01/19 To balance B/d 26 31/01/19 By balance c/d 26
26 26
capital account
particular amount particular amount
to net profit 200 by balance b/d 965
to balance c/d 765
965 965
Smith A/c
Date Particular Amount
(£)
Date Particular Amount
(£)
01/01/19 To balance B/d 18 07/01/19 By cash Account 18
18 18
13

B)Preparing trial balance of Mafuta
Trial balance for the month ending on 31 January
Account Title Debit credit
Cash Account 323
sales Account 412
wages Account 58
Office expense Account 3
Office desk Account 32
Harvey Account 138
Purchase Account 225
Inventory Account 374
furniture and fittings Account 198
Moon Account 26
Suspense account (B/F) 765
Total 1377 1377
C) Preparation of financial statements for Mafuta
Statement of Profit and Loss for the month ended 31 January
Particular Amount (£)
Sales 412
less: Cost of goods sold 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
14

Cost of goods sold 309
Statement of financial position as on 31 January
Assets Amount Liabilities Amount
Non current assets capital 965
furniture and fittings 198 Add: Net profit 42
Office desk 32 bank O/d 84
current assets
cash 323
Inventory 374
Sundry debtors
Harvey 138
Moon 26
1091 1091
TASK 4
Papering accounting statements for Ricardo
15

16

17

18

HYWEL ACCOUNT
DATE PARTICULA
RS
AMOUNT DATE PARTIC
ULARS
AMOUNT
14/06/19 To sales
Account
9000 14/06/19 By trade
Account
450
By cash
Account
8550
9000 9000
JANE ACCOUNT
DATE PARTICULARS AMOUN
T
DATE PARTICULARS AMO
UNT
20/06/19 To cash Account 6000 31/01/
19
By balance c/d 6000
6000 6000
ANDREW ACCOUNT
19

DATE PARTICULARS AMOUNT DATE PARTICUL
ARS
AMOUNT
27/06/18 To ricardo
Account
4410 21/06/18 By purchases
Account
4500
21/06/18 To discount
received Account
90
4500 4500
MANDY ACCOUNT
DATE PARTICULA
RS
AMOUNT DATE PARTICULAR
S
AMOUNT
24/06/19 To sales
Account
5000 24/06/19 By discount
Account
150
31/01/19 By balance c/d 4850
5000 5000
RICARDO ACCOUNT
DATE PARTICULARS AMOUN
T
DATE PARTIC
ULARS
AMOUNT
To balance c/d 15570 25/06/19 By
georgina
Account
11160
27/06/19 By
andrew
Account
4410
15570 15570
TRADE ACCOUNT
DATE PARTICULAR
S
AMOUN
T
DATE PARTICULARS AMOUNT
14/06/19 To sales 9000 14/06/19 By Hywel Account 8550
20

Account
By balance c/d 450
9000 9000
DISCOUNT PAYABLE ACCOUNT
DATE PARTICULAR
S
AMOUN
T
DATE PARTICULARS AMOUNT
24/06/19 To clarie
Account
7500 24/06/18 By cash Account 7075
24/06/19 To sales
Account
5000 24/06/18 By mandy
Account
4850
By balance c/d 575
12500 12500
DISCOUNT RECEIVED ACCOUNT
DATE PARTICULARS AMOUNT DATE PARTICULAR
S
AMOUNT
21/06/19 To andrew
Account
4410 21/06/18 By purchases
Account
4500
13/06/19 To georgine
Account
11160 13/06/18 By purchases
Account
12000
31/01/19 To balance c/d 930
16500 16500
Trial balance of Ricardo for the month ended june
Accounting heads DEBIT(£) CREDIT (£)
cash Account 11075
Sales Account 14700
Purchases Account 16500
discount allowed Account 575
Trade Account 450
21