Distinguish between the accounting for capital expenditures and revenue expenditures?

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Ans:

Capital expenditure are those expenses which are not charged to profit amd loss Account as and when occurred. They are added as an asset to the financial statements. Depreciation expense is provided on them yearly by which value of asset is deduced over time.

Example of capital expenditure are: Buildings, Machinery, Equipments, Computers. These expenses are not immediately charged to profit and loss Account because they generally have a life of more than 1 year.

Revenue expenditure on the other side are those expenses which are not capitalized, means they are provided completely to profit and loss Account in the year they occur. These are the general expenses of business which can be of direct or indirect nature. Direct revenue expenditure are those which relates to manufacturing of goods. Indirect revenue expenditure are the expenses of administration nature.

Example of revenue expenditure are : salary and wages, Audit fees, office expenses, Rental expenses etc. These expenses generally have a life of 1 year or less.

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ekkarill92 answered 2 years ago

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