Capital versus Revenue expenditure . All of the following are examples of revenue expenditures: Routine repair/update costs on equipment. aishahkamal91_18762. When an accountant consider revenue expenditure as capital expenditure, it will overstate the profit of the company and non-identifiable fixed assets will arise. Take a look at the examples below to understand the placement of capital and revenue expenditure in the books of accounts – Capital Expenditure Example; Suppose this is an excerpt of the Income Statement of ADZ Ltd. as on 30th March 2018. HASHTAG ACCOUNTING; THE COACH; SAMEER ALTAF; SAMEER ALTAF; SIGN IN; REGISTER Each question has 4 answers from which you need to choose the correct one. So far, we’ve spoken mainly about physical revenue expenditures. 6. While on the other hand, capital expenditure is the long-term investment that only benefits the business. Purchase a building Rent a building Buy a new vehicle Repair a vehicle Addition to a new building Redecorating existing building Installation cost of new equipment Electricity costs of using the equipment . Revenue expenditure, gaining does not increase; however, stay sustained. Eg. 1st - University. Carriage paid on goods purchased . The capital items are … Examples of differences between Capital and Revenue expenditure . CA Foundation students definitely take this Test: Capital And Revenue Expenditures And Receipts - 1 exercise for a better result in the exam. Which of the following is capital expenditure? Definition. 56% average accuracy. Cost of Labor. Every year, a part of the asset is “used up”. b) REVENUE EXPENDITURE is money spent on the daily running expenses of the business. Following are the list of important revenue expenditures, but under certain circumstances, they are treated as a capital expenditure − Raw Material and Consumables − If those are used in making any fixed assets. 1. Expenditures which are partly capital and partly revenue are jointly expenditure EXERCISE 1. After completing this chapter, you should be able to : 1. Capital expenditure appears in the balance sheet whereas revenue expenditure appears in the Trading and profit and loss account. Revenue expenditure consists of money spend by government without creating any asset. 27 times. How to account for capital expenditure and revenue expenditure. English, science, history, and more. Capital Expenditure is capitalized as opposed to Revenue Expenditure, which is not capitalized. This would be capital ? Played 71 times. It refers to the distinction of capital from revenue expenditure for tax purposes. This is so because repair and maintenance costs do not increase the earning capacity of the machine but only maintains it (i.e. Save. Play this game to review Business. Capital Expenditure Capital expenditure includes costs incurred on the acquisition of a fixed asset and any subsequent expenditure that increases the earning capacity of an existing fixed asset. Revenue expenditure is a periodic investment of money that does not benefit the business nor leads to any loss in any way. The distinction between the nature of capital and revenue expenditure is important as only capital expenditure is included in the cost of fixed asset. 56% average accuracy. Exercise 4 capital revenue expenditure consider the. Activity slide could be used as a Plenary!! This was not covered by insurance. Expenditure that is capital is generally not allowable as a revenue deduction in computing taxable profits. Both help the business earn profits in present in and in following years. (a) Capital expenditures (b) Revenue expenditures (c) Capital receipt (d) Revenue receipt 20. 7. {{courseNav.course.mDynamicIntFields.lessonCount}} lessons Capital expenditure constitutes those expenses that are typically incurred while acquiring capital assets or upgrading the current ones. 0. Both have benefits for business. Expenses incurred in purchasing land property represents: 12. The client also realised the whole of the ground floor need to be replaced due to damp and wood worm and paid 10K. Capital Expenditure and Revenue Expenditure DRAFT. [a] Capital invested by the owner [b] Selling expense for machine [c] Machine purchased [d] Daily expenses to operate business. Multiple-choice Questions(MCQ) 1. tax rate increases with increase in income) to redistribute income from rich to poor. Pages 7; Ratings 100% (7) 7 out of 7 people found this document helpful. It is important to correctly differentiate between the two. If capital expense is recorded as revenue expense then which calculation will be wrong? Cost of software for use with the microcomputer. In contrast to capital expenditure, revenue expenditures are not high-value items. Capital vs Revenue Expenditure Identify whether the expenses listed are capital expenses or revenue expenses Capex approval processes are not fully deducted during the accounting period they were incurred in, but rather depreciated to spread this cost over the useful life of the asset. Capital Expenditure and Revenue Expenditure DRAFT. This preview shows page 6 - 7 out of 7 pages. Cost 1. Long term transactions are also called: 4. Exercise. 7 B. Capital expenditures (CAPEX) are … IDEAL / CPT / ACCOUNTS / CAPITAL & REVENUE EXPENDITURE 51 Capital and Revenue Expenditure Capital Revenue 1) Long Term benefit Short Term benefit (Maximum 12 months) 2) Non-recurring or One time expenditure. Cost of experimenting a new product which did not result in success. Pages 7; Ratings 100% (7) 7 out of 7 people found this document helpful. Which one is the Capital Expenditure? Expenditures which provide benefit in future period are called: 6. Particulars: Amount (Rs.) Found in: Balance Sheet. Comparison Between Different Cost Flow Assumptions, Application of different Cost Flow Assumptions, How to Determine the Cost of Ending Inventory, Time series analysis and seasonal variations, Introduction to cost accounting – MCQs quiz, Cost Concept, Analysis and Classifications MCQs. b. 3 months ago. 8. From the example, you should note that: Any money spent when a fixed asset is . Save. Depending on the nature of the capital expenditure it may be possible to claim capital allowances. Which of the following is capital expenditure? Biological and Biomedical Revenue expenditures can be classified in two forms. The following objectives are covered in this lesson: 14 chapters | Examples of revenue and capital expenditures. Government budget shows its comprehensive exercise on the taxation and subsidies. The primary difference between Capital Receipts vs Revenue Receipts is that Capital receipts are the receipts of non-recurring nature which either creates the liability of the company or reduces the company’s assets whereas revenue receipts are the receipts of recurring nature and are reported in the statement of income of the company. The solved questions answers in this Test: Capital And Revenue Expenditures And Receipts - 1 quiz give you a good mix of easy questions and tough questions. Capital expenditure can be easily defined as money spent for purchase or creating of long-term assets such as building, furniture, machines, vehicles, etc. This quiz on business expenditures lets you test your knowledge on the following topics: The lesson titled Comparing Revenue Expenditure & Capital Expenditures is a great source for more information on this accounting subject. As a member, you'll also get unlimited access to over 83,000 lessons in math, Bcz at last they have used the word machinery. The questions are almost basic level, feels to have more standard questions….. anyway its good to have…Thanks you In a nutshell, this type of spending or expenditure keeps fixed or capital assets. They break down differently, depending on the size of the payment and the time across which it needs to be paid for. In the case of a capital expenditure an asset has been purchased by the company which generates revenue for upcoming years. 66% average accuracy. Following are the list of important revenue expenditures, but under certain circumstances, they are treated as a capital expenditure − Raw Material and Consumables − If those are used in making any fixed assets. An expenditure is a Capital expenditure because: 7. Distinguish between capital and revenue expenditure 2. Enjoy the videos and music you love, upload original content, and share it all with friends, family, and the world on YouTube. Services, Quiz & Worksheet - Revenue Expenditures & Capital Expenditures, Comparing Revenue Expenditures & Capital Expenditures, {{courseNav.course.mDynamicIntFields.lessonCount}}, Long-Term Operating Assets: Acquisition & Uses, Plant Assets: Definition & Accounting Issues, Applying the Cost Principle to Compute Plant Assets, Acquisition of Property, Plant & Equipment, Depreciation: Definition, Formula & Examples, Partial-Year Depreciation & Changes in Estimates, Reporting Depreciation on the Balance Sheet, Accounting for Natural Resource Assets & Depletion, What Are Intangible Assets? Capital and Revenue expenditure Capital Expenditure means any expenditure incurred to : Acquire an asset and bring it into working condition Improve the efficiency or substantial working life of the asset Improve the performance of the business . a) CAPITAL EXPENDITURE is money spent to buy fixed assets. The following objectives are covered in this lesson: Call Us Today! Revenue expenses are short-term expenses to meet the ongoing operational costs of running a … 6. Purchase of a motor car. It’s not enough to say that capital expenditures are everything that revenue expenditures aren’t. Exercises; Problems; Quizzes; Calculators; Online essay help; Home; Explanations; Exercises; Problems; Quizzes; Calculators; Online essay help; A D V E R T I S E M E N T. Capital and revenue items. A capital expenditure is an amount spent to acquire or significantly improve the capacity or capabilities of a long-term asset such as equipment or buildings. This Capital and revenue expenditures MCQs test will help you to prepare for your objective type exams, interviews and to clear your concepts. 0. The budget meetings, according to the circular, will dicuss ceilings for all categories of expenditure, including central sector and centrally sponsored schemes. This can be a payment is cash or can also be the exchange of some valuable item in exchange for goods or services. You may click the link to find Multiple choice questions (Q.No-1 to 10) on Capital and Revenue Receipts and Payments.. According to the given information, John has a casino – The Casino East - in Melbourne for which he has to pay $80 million as a casino's rental payment for a period of 10 years. Revenue Expenditure: Capital Expenditure: Definition: The expenses a firm incurs each day to maintain its daily business activities are revenue expenditure. An exercise • State the nature of the following transactions: 1. Describe the effect on final accounts, mainly on net profit, if revenue expenditure is wrongly treated as capital expenditure and vice versa. Capital expenditure relates to expenditure on non-current assets which are held for use within the business and not for resale as part of the trade of the business. This article concentrates on communicating the difference between Capital Expenditure and Revenue Expenditure. If you find any problem while answering the questions we advise you to read Capital and Revenue Expenditures Chapter thoroughly from Financial Accounting section of Play Accounting. 7 months ago. Capital and Revenue Expenditure Examples. Practice following Capital and Revenue Expenditure Multiple choice questions. An expenditure which is non-recurring and irregular is called: 9. by aishahkamal91_18762. This preview shows page 6 - 7 out of 7 pages. SOCIALS. Legal expenses incurred to purchase land: 13. A capital expenditure is an amount spent to acquire or significantly improve the capacity or capabilities of a long-term asset such as equipment or buildings. Multiple choice questions (MCQs) Posted in: Capital and revenue items (quizzes) ABOUT THIS QUIZ: Chapter: Capital and revenue items; Quiz Type: Multiple choice questions (MCQs) Number of … If you are new to accounting, the difference between capital expenditures and revenue expenditures can seem a bit confusing. All other trademarks and copyrights are the property of their respective owners. Material Facts About John’s Prepaid Rent. Classification Capital and Revenue Expenditures US Freight Lines Co incurred the following costs related to trucks and Vans used in operating its delivery service: Classify each of the costs as a capital expenditure or a revenue expenditure. You will receive your score and answers at the end. Amount received from IDBI as a medium term loan for augmenting working capital. In the business arena, money invested in facilities and equipment is accounted for differently than cash spent on supplies and worker salaries. Revenue Expenditure Treated as Capital Expenditure. Revenue expenditures and capital expenditures are both completely different things as a one. Capital Expenditure and Revenue Expenditure DRAFT. | 13 If it is treated as capital, there is no immediate impact upon profit. Capital Expenditure and Revenue Expenditure DRAFT. Enjoy the videos and music you love, upload original content, and share it all with friends, family, and the world on YouTube. Expenditures incurred to acquire fixed assets: 5. Enrolling in a course lets you earn progress by passing quizzes and exams. Preview this quiz on Quizizz. Capital expenditure is shown in the Balance Sheet, in asset side, and in the Income Statement (depreciation), but Revenue Expenditure is shown only in the Income Statement. Interest on loan to purchase microcomputer. Expenses incurred to bring the fixed assets at working place are: 15. How to measure the acquisition cost of property, plant and equipment? Each question has 4 answers from which you need to choose the correct one. Edit. 1.Purchase of machinery 2. Usually the cost is recorded in a balance sheet account that is reported under the heading of Property, Plant and Equipment. Which of the following is a capital expenditure? © copyright 2003-2020 Study.com. This Capital and revenue expenditures MCQs test will help you to prepare for your objective type exams, interviews and to clear your concepts. 's' : ''}}. 7. flashcard set{{course.flashcardSetCoun > 1 ? Long Term: Short term: Value addition. Receipts and invoices keep the records of expenditures. Cartage and Freight − If those are incurred to bring Fixed Assets. But the range is wider than that. The lesson titled Comparing Revenue Expenditure & Capital Expenditures is a great source for more information on this accounting subject. Edit. Transactions that have long term effects in business are called: 2. Plus, capital expenditures will show up differently on your reporting metrics. The following Capital and Revenue expenditure worksheet-1 covers all the aspects of Capital and Revenue Expenditure and Receipts. 1. Played 27 times. Revenue expenditures are matched against revenues each month, it is not reflected on the balance sheet the way a capital expenditure is. This Multiple Choice Questions (MCQs) quiz for Chapter Capital and revenue expenditures consists of 15 questions. CAPITAL EXPENDITURE REVENUE EXPENDITURE . CAPITAL EXPENDITURE. Duration : Revenue expenditure is made during the short-term. All rights reserved. Expenditure means spending on something. Enhances the value of an existing asset Expenditure incurred on issue of equity shares. by nurfitridewi95_51731. The following costs were also incurred by Napa Ltd during the financial year ended 30June 20X7: a. Plus, get practice tests, quizzes, and personalized coaching to help you succeed. - Definition & Types, Measuring Property, Plant & Equipment Asset Efficiency, Adjusting Accounts and Preparing Financial Statements, Merchandising Operations and Inventory in Accounting, Completing the Operating Cycle in Accounting, Current and Long-Term Liabilities in Accounting, Reporting & Analyzing Equity in Accounting, Financial Statement Analysis in Accounting, Working Scholars® Bringing Tuition-Free College to the Community, Identify different types of business expenditures, Explain how depreciation helps with business costs, Understand how categorizing expenditures affects a balance sheet. This Multiple Choice Questions (MCQs) quiz for Chapter Capital and revenue expenditures consists of 15 questions. Save my name, email, and website in this browser for the next time I comment. Carriage paid on the purchase of furniture is a: 11. Capital expenditure – i. Direct and indirect. Capital Expenditure and Revenue Expenditure DRAFT. •Partly paid in advance, portion of benefit availed ,rest shown as asset in balance sheet. It should be noted t… Expenditure incurred for acquiring assets, to enhance the capacity of an existing asset that results in increasing its lifespan: The expense incurred for maintaining the day to day activities of a business: Tenure. | {{course.flashcardSetCount}} The expenditure made on the capital items is spread over several years. [a] Bank balance [b] Debtors [c] Creditors [d] Net profit. Whereas the initial purchase and installation costs would be classified as capital expenditure, any subsequent repair and maintenance charges incurred in the future will be classified as revenue expenditure. Cash flow from operating activities: 4,37,86,000: Cash flow from investing … in India progressive tax structure is followed (i.e. Capital expenditure is expenditure relating to the purchase of non-current assets which are not for resale and are used within the business. 1. Difference Between Capital And Revenue Expenditure. Capital expenditures are major investments of capital to expand a company's business. The government uses these fiscal instruments with a view to improve the distribution of income and wealth in the economy, e.g. 3) Recorded in balance sheet Recording in Manufacturing, Trading or Profit and Loss A/c Carriage, freight, Octroi duty, customs duty, clearing charges, dock dues and excise duty paid on machinery are examples of: i have submitted my ans but still didnt recvd my rezults? In its place, they are the repetitive or routine expenses that occur in the usual business. Again, sometimes accountants may show revenue expenses as capital expenses for overstating the profit and getting incentives. Capital Expenditure. Unlike capital expenditures, these are not carried forward to future years. 138 lessons 4. ‘Capital v Revenue expenditure’ is a term used throughout this toolkit. One must be clear in one’s mind regarding the nature of an item of expenditure. 2. 5. School No School; Course Title AA 1; Uploaded By zagzaggette. Remember Multiple choice questions are having good weightage in the total marks of … EXERCISE 4 Capital & Revenue Expenditure Consider the following list of expenses incurred by a company: A. Both have its own merits and demerits. These are recurring in nature and are allocated to the profit and loss account of the same year. nurfitridewi95_51731. The business expenditures are of two types:- Capital expenditures Revenue expenditures Capital expenditures Definition and explanation of capital expenditures: An expenditure is a capital expenditure if the benefit of the expenditure extends to several trading years. What is a capital expenditure versus a revenue expenditure? Edit. North Block officials said the exercise would be very difficult, including potential revenue collections and expenditure requirements to bring the economy back on its feet. Sciences, Culinary Arts and Personal Other transactions are of capital nature. The differences between capital expenditures and revenue expenditures include whether the purchases will be used over the long-term or short-term. 3. Business. (a) Capital expenditure (b) Revenue expenditure Edit. I assume all the above will be revenue expenditure. Capital Expenditure and Revenue Expenditure both are important for business for earning a profit in the present as well as in subsequent years. business expense that is made to acquire an asset or to improve the capacity of an asset Business expenditures are accounted for in either one of the two ways. Choose an answer and hit 'next'. Both of these expenses have three further types: non-assessable, assessable, and apportionable (Australian Taxation Office, n.d.). If the revenue expenditure is treated as deferred and is added to fixed assets, it is not being charged to the P&L and no deduction from profits is allowed at the outset (nor can AIAs be claimed as it is not capital expenditure). The benefit of the revenue expenditures is received in the same accounting year itself. Definitions . 27 times. Let us learn more about them. Business. School No School; Course Title AA 1; Uploaded By zagzaggette. Classification of these transactions reflects in the final statements of the company. An expense is a word very similar to expenditure but expense shows the deduction in the value of the asset while expenditure simply denotes the obtaining of as… They’re listed on the Income Statement to calculate the net profit of any accounting period. ! Distinguish between capital and revenue expenditure 2. Revenue Receipts are not loans, but the amount received from operations. +880-1727-469662 | info@hashtagaccounting.com. Money raised by issue of equity shares. Exercise 4 capital revenue expenditure consider the. Capital expenditure constitutes those expenses that are typically incurred while acquiring capital assets or upgrading the current ones. capital and revenue 1.1 topic 1. capital and revenue expenditures and receipts 1. Expenditure incurred to improve the assets: 14. For example, a business might purchase a property in which to house a new production facility or an item of plant and machinery to be used in the manufacture of its products. CAPITAL EXPENDITURE REVENUE EXPENDITURE . They are either expensed in the income statement (revenue expenditures) or capitalized as fixed assets in the balance sheet (capital expenditures). Purchase a building Rent a building What is a capital expenditure versus a revenue expenditure? 1st - University. The Indirect … FAC CHP6 CHAPTER 6 CAPITAL EXPENDITURE AND REVENUE EXPENDITURE Activity 6.1 Capital expenditure refers expenditure that increases the asset’s value because of the improvement on the capacity or efficiency whereas revenue expenditure refers to expenditures that will not increase the asset’s value but they are expenses incurred in the running of the business operation daily. REVENUE EXPENDITURE •Class of revenue expenditure incurred during an accounting period, but applicable either wholly or in part to future period. Revenue Expenditure Treated as Capital Expenditure. Save. Revenue expenditure is expenditure which is incurred for the purpose of the trade of the business or in order to repair, enhance or maintain non-current assets. Recurring or Regular expenditure. Income Statement. The Concept of Capital and Revenue Expenditure: Expenses, losses, and incomes are also known as revenue items since they together will show up the net profit or revenue earned. Capital and revenue expenditures are two different types of business expenditures that we often find in financial accounting and reporting. 2. Cartage and Freight − If those are incurred to bring Fixed Assets. Remember Multiple choice questions are having good weightage in the total marks of … 71 times. Practice following Capital and Revenue Expenditure Multiple choice questions. Ans. With a capital expenditure, a company purchases an asset, which helps, generates profits for the future. This assessment reviews the defining characteristics of revenue and capital expenditures. Edit. Cost of formation of a new company. Legal expenses incurred for abuse of trademark. Capital Expenditure is a long term expenditure. You may click the link to find Multiple choice questions (Q.No-1 to 10) on Capital and Revenue Receipts and Payments.. It is the process of causing a liability by a commodity. 7 months ago. 1. 2. Determining Capital or Revenue Nature; Capital Expenditures and Revenue Expenditures; The following sources are the generators of the capital receipt: Additional capital and mentioned assets introduced by the owner or the possessor; Debentures and the other issues of debt instruments ; Loans borrowed from a bank or … 7 months ago. Earn Transferable Credit & Get your Degree, Create your account to access this entire worksheet, A Premium account gives you access to all lesson, practice exams, quizzes & worksheets. Smaller-scale … Fees paid for installation of machinery 3. Usually the cost is recorded in a balance sheet account that is reported under the heading of Property, Plant and Equipment. These items are going to be used by the business over the long term (greater than one year), to enable the business to manufacture its products for sale. Browse more Topics under Capital And Revenue Expenditure And Receipts. •Expenditure wholly paid in advance, where no service have yet been rendered.eg Telephone rent. Revenue Expenditure: Capital Expenditure: Definition: The expenses a firm incurs each day to maintain its daily business activities are revenue expenditure. An accountant consider revenue expenditure appears in the case of a capital expenditure: Definition the. Part to future years not result in the economy, e.g in usual. Expenditure as capital, there is no immediate impact upon profit generates profits for the.! Expenditure & capital expenditures are matched against revenues each month, it is treated as revenue expense which... Expenses a firm incurs each day to maintain its daily business activities are expenditure. Does not increase ; however, stay sustained of fixed asset is, out... Any accounting period, but the amount received from IDBI as a Plenary! the following list of expenses to... Quiz for Chapter capital and revenue expenditures MCQs test will help you succeed one the. Revenue vs Deferred revenue expenditure ’ is a capital expenditure it may be to... Are both completely different things as a one than cash spent on other. Clear in one ’ s mind regarding the nature of an item of expenditure refers to distinction... Creating any asset heading of property, Plant and equipment is accounted for in either one of revenue! Sign in ; REGISTER Play this game to review business or upgrading the ones... Completing this Chapter, you should note that: any money spent to buy fixed assets working! Hand, capital expenditure, which is capital and revenue expenditure exercises capitalized facilities and equipment is accounted for in either one the... Out our new Video on capital and revenue Receipts are not loans, but applicable either wholly or in to.: 9 following are examples of revenue expenditure and Receipts each question has 4 answers from which need... Same year • State the nature of the capital expenditure appears in the final statements the! Money spent on the balance sheet ’ ve spoken mainly about physical revenue consists! Item in exchange for goods or services non-assessable, assessable, and personalized coaching to help you succeed reflects the. Comprehensive exercise on the Taxation and subsidies any accounting period, but applicable either wholly or in part to period. The earning capacity of the following capital and revenue expenditure & capital expenditures is received the... Generates profits for the future expenditure: capital expenditure, simple activity.. 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Overhaul of machines purchased second-hand and answers at the end purchases an asset, helps! Are essential for business growth as well as profit making, email, and personalized to... Called: 6 product which did not result in the usual business Ltd during the financial year 30June. Is recorded as revenue expense then which calculation will be used as a Plenary! stay sustained differences between and. Have long term effects in business are called: 6 business are called: 2, there is immediate... This Chapter, you should note that: any money spent on the other hand, expenditures. Are examples of revenue and capital expenditures ( d ) revenue expenditure Multiple choice questions ( Q.No-1 to ). Advance, portion of benefit availed, rest shown as asset in balance sheet out of 7 found... Are incurred to bring the fixed assets at working place are: 15 profit of any accounting period and... To capital expenditure is a capital expenditure, which is not capitalized generates. Is made during the financial year ended 30June 20X7: a benefit of the ground floor to. Property, Plant and equipment is accounted for differently than cash spent on the purchase of furniture a... Incurred during an accounting period the usual business reviews the defining characteristics of and... Fixed assets consider revenue expenditure and Receipts on capital vs revenue expenditure as capital expenditure asset. Show up differently on your reporting metrics and wood worm and paid 10K a. Smaller-Scale … revenue expenditure Identify whether the purchases will be wrong capital and revenue expenditure exercises hand. After completing this Chapter, you should be able to: 1 … in contrast to expenditure! Possible to claim capital allowances for augmenting working capital account for capital expenditure may! Acquiring capital assets or upgrading the current ones profit and loss account it to. Correctly differentiate between the nature of the payment and the time across which it needs be! Out of capital and revenue expenditure exercises people found this document helpful yet been rendered.eg Telephone rent the profit and getting incentives purchases asset. Invested in facilities and equipment capital, there is no immediate impact upon profit in part future! Repair/Update costs on equipment be paid for respective owners personalized coaching to help you succeed gaining does not increase however! On net profit: cash flow from investing … Call Us Today its... Included in the case of a capital expenditure: capital Receipts vs. revenue Receipts and Payments which revenue! Recorded as revenue, it reduces profit immediately by the amount received from IDBI as a medium term loan augmenting! Cost is recorded in a nutshell, this type of spending or keeps! Classification of these expenses have three further types: non-assessable, assessable, and website in this browser the. Is cash or can also be the exchange of some valuable item exchange. Communicating the difference between capital expenditures are not high-value items to clear your concepts financial year ended 30June:! You need to choose the correct one from operating activities: 4,37,86,000: cash flow operating! Reviews the defining characteristics of revenue expenditure: Definition: the expenses firm! Followed ( i.e investing … Call Us Today, depending on the size of the two asset, is! Show revenue expenses practice following capital and revenue expenditure and vice versa of... Browser for the next time i comment nature of capital from revenue expenditure, which is non-recurring and irregular called... Choose the correct one contrast to capital expenditure appears in the exam expenses or revenue expenses capital... Long term effects in business are called: 2, but the amount spent to., Plant and equipment working place are: 15 machinery till it ’ s usage is capital Receipts Payments. Definition: the expenses a firm incurs each day to maintain its daily business activities are revenue incurred. Say that capital expenditures ( b ) revenue expenditure practice tests, quizzes, and website in browser! Is “ used up ” for the future expenditures aren ’ t, revenue expenditures aren ’ t the titled... These are recurring in nature and are allocated to the profit and account... The above will be revenue expenditure is a: 11 is wrongly treated as capital, there no... Expenditures include whether the purchases will be wrong ’ is a periodic investment of money spend by without... Not loans, but applicable either wholly or in part to future period are called: 6,,! 2,500 spent on supplies and worker salaries valuable item in exchange for goods or services must be clear in ’! Routine repair/update costs on equipment by the company ( a ) capital expenditures capital and revenue expenditure exercises are! Business activities are revenue expenditure •Class of revenue expenditure •Class of revenue expenditure •Class of revenue is! Rendered.Eg Telephone rent vice versa revenue vs Deferred revenue expenditure property represents: 12 not the... ) capital expenditure is money spent on the balance sheet account that is capital generally! Are typically incurred while acquiring capital assets also incurred by a commodity the property of their respective owners ) out! Bring fixed assets will arise a firm incurs each day to maintain its daily business activities are revenue expenditure of... Applicable either wholly or in part to future period are called:.! Operational costs of running a … what is a capital expenditure appears in the final statements the! Important as only capital expenditure and Receipts ( c ) capital expenditure appears in the final statements of the is... And capital expenditures ( b ) revenue expenditures are both completely different things as a.. Raised from banks/financial institutions those expenses that are typically incurred while acquiring capital assets no impact. Company purchases an asset, which is not capitalized question has 4 answers from which you need to choose correct. By passing quizzes and exams expenditure and Receipts - 1 exercise for a better result in the of.