Accounting Fundamentals: Capital and Revenue Expenditure Report

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Accounting Fundamentals
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Table of Contents
Accounting Fundamentals...............................................................................................................1
Capital Expenditures........................................................................................................................2
Revenue Expenditure.......................................................................................................................2
Difference between Capital and Revenue expenditure....................................................................4
Reference.........................................................................................................................................5
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Capital Expenditures are the costs that have been incurred on the acquiring of assets of fixed
nature and any expenditure on the fixed assets that increase the capacity of the fixed assets which
already exist in the organization. the expenses of capital do not only include acquisition expenses
but also the cost that is related to bringing the new acquired fixed assets in the location it has
been required by the firm, this type of expenses are known as delivery expenses. The capital
expenses are a one-time basis but the benefits drive from it will be for a long period. Some of the
expenses include in this are purchase costs which exclude discount received on purchases,
delivery costs, installation costs, legal charges, up-gradation costs, replacement costs, etc (Weil,
et. at., 2013).
Revenue Expenditure is related to the expenses which have been incurred on the fixed assets
for maintaining them. These costs are continuously or regular cost that benefits the organization
for a short time. Revenue costs are also known as repair and maintenance cost which does not
improve the earning capacity of the firm. Some of these costs include repairing costs, repainting
costs, maintenance costs, renewal cost, etc. this expense has been shown in the income statement
in that period in which they are generated. Expenses on revenue are incurred in the operating
activities. Revenues are recognized as when they are earned on the other hand expenses are
recognized as and when they are incurred, according to the accrual accounting assumptions (S,
2019).
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.
Capital expenditure Revenue expenditure
 These expenses are incurred for
purchasing of fixed and capital assets.
 These expenses has been incurred for
maintaining fixed assets
 Helps in improving the capacity or
efficiency of the assets which has been
already acquired in the organization.
 These expenses have been incurred in
operating the daily activities of the
business (Nobes, 2015).
 Expenses of capital nature gives long
term benefit to the organization
 Revenue expenses are for shorts term
period
 The capital expenditure is shown in
both the income statement as well as
the balance sheet as an investment for
the organization
 Revenue expenses show only in the
income statement as the expenses.
 Capital nature expenses are non-
recurring
 Revenue nature expenses are recurring
by nature (Weil, et. at., 2013).
 The benefit driven by capital
expenditure is for the long term or more
than one year
 The benefit from revenue expenses is
for current nature or less than one year.
 A company invests in the capital
expenditures for increasing the capacity
of the company by increasing the
capacity of the fixed asset this helps the
company in enhancing its profitability.
 Revenue expenses do not improve
earning capacity like capital expenses;
these expenses only maintain the
earning capacity of the firm.
 Capital expenses do not match with the
capital receipts of a firm
 While revenue expenses matched with
the receipts if revenue (S, 2019).
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Reference
 Nobes, C., 2015. Accounting for capital: the evolution of an idea. Accounting and
Business Research, 45(4), pp.413-441.
 S, S. 2019. Difference Between Capital Expenditure and Revenue Expenditure (with
Example and Comparison Chart) - Key Difference. [online] Key Differences. Available
at: https://keydifferences.com/difference-between-capital-and-revenue-expenditure.html
[Accessed 10 Aug. 2019].
 Weil, R.L., Schipper, K. and Francis, J., 2013. Financial accounting: an introduction to
concepts, methods, and uses. Cengage Learning.
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