Capital and revenue expenditure

Capital and revenue expenditure

Capital Expenditures

The expenditure which generates revenue or income is called capital revenue. It is incurred either for buying permanent assets or for improving their existing working capacity. It helps to increase production.

Items related to capital Expenditures;

1. Expenditure and incurred in buying , transporting and installing a permanent assets.

2. Expenditure incurred in overhauling and installing an old asset to put in production process.

3. Cost of Registration and legal charges incurred in buying or constructing a permanent assets.

4. Expenditure incurred in improving or extending the working capacity of an existing assets.

5. Expenditure incurred in getting benefits over a number of years.

Revenue expenditure 

Any expenditure incurred in connection with the operation and administration of daily activities of the business is called revenue expenditure. It is incurred for maintaining earnings capacity and working efficiently of fixed assets. Similarly it is incurred for acquiring merchandise for resale either in its original or improve forms. It is shown on debit side of trading and profit and loss account.

Items related to revenue expenditure:

1. Expenditure incurred in acquiring raw material for manufacturing process of furnished goods for resale.

2. Wages and all other items of manufacturing expenses.

3. All items of office , administration , selling and distribution expenses.

4. Repair , maintenance and depreciation of all the fixed assets.

5. Interest on Loan and other financial expenses.