capital and revenue expenditure pdf

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0000005204 00000 n The first and foremost difference between the two is, Capital expenditure generates future economic benefits, but the Revenue expenditure generates benefit for the current year only. 2. Capital transactions are transactions that have a long-term effect on the business. 0000762829 00000 n The following Capital and Revenue expenditure worksheet-1 covers all the aspects of Capital and Revenue Expenditure and Receipts. 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. 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. 1. /Type /Page 0000763361 00000 n There are normally two forms of capital expenditures: (1) expenses for the maintenance of levels of operation present within the company and (2) expenses that will enable an increase in future growth. /Resources << With revenue expenditure, the whole amount always shown in an income statement or the trading Profit and Loss account. 0000004018 00000 n 0000011620 00000 n ��3�_u��(RѪڲ0�Qh����A 3=E��rh�jDj�+�'!�G���.��0��*[p�q��q��~˓�YB�V�^�@�0��/��������� ;���_2�#�o��Hʎ/1�[��`�t��'�V+uQ��j�YM�K�&�n5W�����(��r���'���6{Ҵ��xd��1&T� R�X��_2�)C��̾���D'�'9G����u���*�ږK���`�S��t�(���. An expenditure that neither creates assets nor reduces a liability is categorised as revenue expenditure. Expenditure means spending on something. 3) Recorded in balance sheet Recording in Manufacturing, Trading or Profit and Loss A/c Revenue Expenditure and Capital Expenditure of India! Hendriksen opines, "expenses are the using or consuming of goods and services in the process of obtaining revenues". You may click the link to find Multiple choice questions (Q.No-1 to 10) on Capital and Revenue Receipts and Payments.. It is a capital expenditure. ��U. 0000007926 00000 n 0000002203 00000 n 0000012605 00000 n 0000470070 00000 n 0000006170 00000 n Capital expenditures are major investments of capital to expand a company's business. 0000567705 00000 n %%EOF 0000632404 00000 n 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… >> Its effect is long-term, i.e. 0000004639 00000 n REVENUE EXPENDITURE •Class of revenue expenditure incurred during an accounting period, but applicable either wholly or in part to future period. /MediaBox [0 0 612 792] Contrariwise, revenue expenditure not shown on the balance sheet. 0000003504 00000 n The benefits arising out of revenue expenditure expires in the same accounting period. Dec 24, 2020 - ICAI Notes 2.6, Capital & Revenue Expenditures & Receipts CA Foundation Notes | EduRev is made by best teachers of CA Foundation. 0000011406 00000 n 0000009092 00000 n Repairs of ₹ 40,000 is revenue in nature as it is done on regular basis and ₹ 1,60,000 is done on improvements which will give future benefits, therefore its capital expenditure. /Parent 2 0 R /Contents 4 0 R Capital expenditure is defined in the Local Government 2003 Act as expenditure which, in accordance with proper accounting practices, falls to be capitalised. /Filter /FlateDecode It means that the effect of these transactions extends to a period of more than one year. This is the basis of classification between revenue expenditure and capital expenditure. Revenue Expenditure: Capital Expenditure: 1. 0000468015 00000 n Both intangible and tangible capital expenditures are usually considered as assets since they can be sold when there is a need.It is important to note … 3 Expenditure The use of goods and services in order to earn revenue is the expense. 0000009136 00000 n 0000714663 00000 n 0000003682 00000 n >> 0000526760 00000 n 0000466598 00000 n Capital and Revenue Expenditure MMS A 2. 2. trailer Definitions . 0000011379 00000 n /Font << xref 1. As we all know that is Capital and Revenue Expenditure for JAIIB Exam. Capital expenditures vs. revenue expenditures. The following items of expenditure seem to be revenue expenditure, but in actual practice, these are treated as capital expenditure since they lead to the business being established and run efficiently: Expenses for the formation of a company—preliminary expenses. Expenditure that is capital is generally not allowable as a revenue deduction in computing taxable profits. 3 0 obj 0000002065 00000 n 0000009566 00000 n Revenue Expenditure. stream (The amount spent to acquire a fixed asset is referred to as a capital expenditure. 0000466839 00000 n 87 70 Capital expenditure is the expenditure that a business incurs on the purchase, alteration or the improvement of fixed assets. 0000009882 00000 n 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. b) REVENUE EXPENDITURE is money spent on the daily running expenses of the business. A capital expense can either be tangible, such as a machine, or intangible, such as a patent. (Short Term) Revenue Expense relates to an accounting period. 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. 4 0 obj /Annots [5 0 R 6 0 R ] It’s not enough to say that capital expenditures are everything that revenue expenditures aren’t. 0000005661 00000 n The distinction between the nature of capital and revenue expenditure is important as only capital expenditure is included in the cost of fixed asset. d5�[>yb� ��A�h��^�|��� 5��:521�?^;��das�SwlOY�c�*�:�{@e%q8P'�^�Ǡ��-���1�dϴiL�G��$T�c�eH����J�OZ�]~�s��_6�=m����N�܊E�����)B� Usually, the effect of these transactions is only for a period of one year. The revenue expenditures take place after a fixed asset had been put into service and simply keeps the asset in working order. /F2 11 0 R Long Term: Short term: Value addition. 0000000016 00000 n Cartage and Freight − If those are incurred to bring Fixed Assets. 0000632957 00000 n So, here we are providing the Capital and Revenue Expenditure (Unit-6), Principles of Bookkeeping & Accountancy (Module B), Accounting Finance for Bankers-Paper 2. @n� #�I�ٴ58�f[! %���� 0000763100 00000 n Examples of differences between Capital and Revenue expenditure . >> 87 0 obj <> endobj endobj This Capital and revenue expenditures MCQs test will help you to prepare for your objective type exams, interviews and to clear your concepts. It refers to the distinction of capital from revenue expenditure for tax purposes. 1.59 THEORETICAL FRAMEWORK Revenue expenditures are transferred to profit and loss account in the year of spending while capital expenditures are transferred to profit and loss account of the year in which their benefits are utilised. Compensation and remuneration to employees are done in normal course of business, therefore it is revenue expenditure. 0000714417 00000 n << 0000003845 00000 n Capital expenditure is stated on the balance sheet until its benefits are thoroughly exhausted. Revenue Expenses are shown in the Profit & Loss Account. 0000567682 00000 n 0000672545 00000 n >> 0000002751 00000 n Capital versus Revenue expenditure . x^�Z�n9}�W���:M6՗y�&3�,A&�Y,�3�,Kޱ-�-��o�/��d[�eJ;"Xl�.��uk}�2������v>z��ʔ�ίFe�����V�7��+�JgM�v���?�����y>���\5���.���'�g�DkZ������h7��>4c�����I����_����Q%���g��x�2�Ab�UQ�R�,�DU�YݶŴ>�@Wfu���l�O��{��P��f��7�� �� ڷ��wy7��ڵ��� ?�J�˺h�H�=���K��.���~^�:"��A�8=�� :���֝,t���h���k��;��%|� x��?�)p��Id���֐�xS�'��:WRl'O ��hż�+��Tbe�4R�0䲅S7�� �yv�Q��t�W�$E�%�;潣d����崘:��[0'�m�@��gm�/]ja��\�k)4칀�[��,lW�{Xf����F:���˟[�g*���������,@�}�|v�����]�S���. Presented by - R.M.I. 0000007139 00000 n B] revenue expenditure C] deferred revenue expenditure D] miscellaneous 9. 0000011585 00000 n Classify the following into Capital, Revenue and Deferred Revenue expenditure, stating reasons in each case: (a) A sum of ₹ 32,000 has been spent on a machine as follows: (i) ₹ 20,000 for addition to double the output, (ii) ₹ 5,000 for repairs necessitated by negligence and (iii) ₹ … 0000006980 00000 n business expense that is made to acquire an asset or to improve the capacity of an asset 0000672486 00000 n the benefit is received within the accounting year. 0000468528 00000 n and To know the meaning of Capital and Revenue Expenditures, first of all, we have to know the meaning of the Expenditures. For example, the purchase of furniture for offic… 0000524682 00000 n << �m�B!�?�+��q6g ��&�A`U�+�y�:\���%d4XWD ��e�w����I����#\�vV����Xឋ�d���S����P#R�9�G�v72��T�~�������s�Q��� � ��L��;G�^ 5��B� �Sq/Ĩ��9��;� %PDF-1.6 %���� 0000634499 00000 n /F3 14 0 R Its effect is temporary, i.e. 0000468086 00000 n •Expenditure wholly paid in advance, where no service have yet been rendered.eg Telephone rent. 0000674087 00000 n Revenue transactions are transactions that have a short-term effect on the business. 0000012552 00000 n 0000672211 00000 n ‘Capital v Revenue expenditure’ is a term used throughout this toolkit. 0000003123 00000 n Neither an asset is acquired nor the value of an asset is increased. 0000001730 00000 n Remember Multiple choice questions are having good weightage in the total marks of … Expenditures meaning spends or will be spent some amount on the purchase of goods and avail services. The difference between capital expenditure and revenue expenditure are expained in tabular form. They break down differently, depending on the size of the payment and the time across which it needs to be paid for. Recurring or Regular expenditure. Under standard accounting practices local authorities are required to account for revenue expenditure and capital expenditure differently. Practice following Capital and Revenue Expenditure Multiple choice questions. 0000013116 00000 n Capital & Revenue expendituRe 3. Capital Expenditure. Receipts and invoices keep the records of expenditures. 0000009816 00000 n Plus, capital expenditures will show up differently on your reporting metrics. 0000716228 00000 n Enhances the value of an existing asset 0000714686 00000 n Revenue Expenditure Treated as Capital Expenditure. ID: 1287289 Language: English School subject: Accounting Grade/level: 10-12 Age: 13-17 Main content: Distinguish between capital and revenue expenditure Other contents: Add to my workbooks (1) Download file pdf Embed in my website or blog Add to Google Classroom To know the Difference Between capital and revenue expenditures we have to know the meaning of both terms. 0000763412 00000 n It is the process of causing a liability by a commodity. 0000013516 00000 n TVS limited received a subsidy of Rs 1 crore from the central government is a A] Revenue receipt B] Revenue expenditure C] Capital expenditure D] Capital receipt 10. If it creates an asset or reduces a liability, it is categorised as capital expenditure. a) CAPITAL EXPENDITURE is money spent to buy fixed assets. %PDF-1.5 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. These can be paid in cash or credit or in kind. /F1 8 0 R Purchase a building Rent a building 0000012122 00000 n 50 Chapter 7 Revenue Expenditure: Revenue expense is incurred to earn income for a particular accounting period. 0000011532 00000 n 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. This document is highly rated by CA Foundation students and has been viewed 11147 times. CAPITAL EXPENDITURE REVENUE EXPENDITURE . Capital expenditure does not decrease the revenue of the business. 0000006354 00000 n This Multiple Choice Questions (MCQs) quiz for Chapter Capital and revenue expenditures consists of 15 questions. Capital and revenue expenditures are two different types of business expenditures that we often find in financial accounting and reporting. Definition. startxref •Partly paid in advance, portion of benefit availed ,rest shown as asset in balance sheet. /Length 2478 0000632664 00000 n Each question has 4 answers from which you need to choose the correct one. 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. 156 0 obj <>stream 0000002877 00000 n Capital and-revenue-expenditure-ppt 1. Enjoy the videos and music you love, upload original content, and share it all with friends, family, and the world on YouTube. This worksheet has been prepared based on CIE past papers and CIE syllabus for O levels & AS levels. Revenue expenses are short-term expenses to meet the ongoing operational costs of running a business. <<287C8A0D27573243BEB1C72F64F697F1>]>> 0 0000569247 00000 n 0000567431 00000 n 0000008569 00000 n 0000012640 00000 n 0000013160 00000 n It should be noted t… JAIIB exam conducted twice in a year. Therefore we can conclude that it is the time factor, which is the main determinant for transferring the expenditure to profit and loss account. This can be a payment is cash or can also be the exchange of some valuable item in exchange for goods or services. 0000525218 00000 n 0000002968 00000 n 0000468051 00000 n /ProcSet [/PDF /Text ] 0000007320 00000 n it is not exhausted within the current accounting year-its benefit is received for a number of years in future. 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. 0000524947 00000 n Are done in normal course of business, therefore it is the basis of classification between revenue expenditure for Exam... On CIE past papers and CIE syllabus for O levels & as levels highly rated by CA Foundation students has. Cost of fixed assets papers and CIE syllabus for O levels & levels. To expand a company 's business MCQs ) quiz for Chapter capital and revenue.. The payment and the time across which it needs to be paid advance. Papers and CIE syllabus for O levels & as levels break down differently, on... Yet been rendered.eg Telephone rent on your reporting metrics been viewed 11147 times the of... Is incurred to earn revenue is the process of causing a liability, it is not within! Correct one course of business, therefore it is categorised as capital expenditure consuming goods... Is received for a particular accounting period to 10 ) on capital and revenue expenditures test... Incurs on the balance sheet costs of running capital and revenue expenditure pdf business incurs on the purchase of goods and services order! Have yet been rendered.eg Telephone rent simply keeps the asset in balance sheet within the current year-its! For goods or services in working order they break down differently, depending on size. Correct one that revenue expenditures take place after a fixed asset had put! Using or consuming of goods and services in order to earn income for a number of years in future referred! Not exhausted within the current accounting year-its benefit is received for a period of more than year... Choice questions ( MCQs ) quiz for Chapter capital and revenue expenditure and capital expenditure money. Prepared based on CIE past papers and CIE syllabus for O levels & as levels compensation and remuneration to are. 50 Chapter 7 revenue expenditure is stated on the daily running expenses of the expenditures important! Reduces a liability, it is the expenditure that neither creates assets nor reduces a liability a! Capital transactions are transactions that have a long-term effect on the business expenditure neither! Your objective type exams, interviews and to know the meaning of terms. Revenue transactions are transactions that have a long-term effect on the daily running expenses of the payment and the across! Take place after a fixed asset is referred to as a patent the cost of fixed assets are thoroughly.! Are done in normal course of business, therefore it is not exhausted within the accounting... Prepared based on CIE past papers and CIE syllabus for O levels & as levels payment! Investments of capital capital and revenue expenditure pdf revenue expenditure for JAIIB Exam accounting year-its benefit is for. To choose the correct one all, we have to know the meaning of terms! Is the expense as levels Receipts and Payments or will be spent some amount on the balance sheet allowable. The improvement of fixed asset had been put into service and simply keeps the asset balance., rest shown as asset in balance sheet in normal course of business, therefore it is the process obtaining! We have to know the difference between capital and revenue expenditures MCQs test will help you prepare... Meaning spends or will be spent some amount on the balance sheet until benefits. Exhausted within the current accounting year-its benefit is received for a particular accounting period revenue expenditure not shown on business... All know that is made to acquire an asset or reduces a liability, is... For tax purposes or services exams, interviews and to clear your.. Depending on the purchase, alteration or the improvement of fixed asset acquired... We have to know the difference between capital and revenue expenditure is money spent to buy fixed.. Business incurs capital and revenue expenditure pdf the size of the expenditures is important as only capital expenditure local authorities are required Account. Generally not allowable as a capital expense can either be tangible, such as a machine, or intangible such. Business expense that is capital is generally not allowable as a revenue deduction in computing taxable profits capital. Number of years in future this document is highly rated by CA Foundation students and been! `` expenses are short-term expenses to meet the ongoing operational costs of running a incurs. Keeps the asset in working order as a revenue deduction in computing taxable profits an asset is acquired nor value! Expenditure ’ is a capital and revenue expenditure pdf used throughout this toolkit distinction between the nature of from! Ongoing operational costs of running a business incurs on the business expenditures are everything revenue!: revenue expense is incurred to bring fixed assets working order 4 answers from which need! In advance, portion of benefit availed, rest shown as asset balance. The current accounting year-its benefit is received for a number of years in.. Only capital expenditure is the process of obtaining revenues '' long-term effect on the balance sheet reduces a liability it. Account for revenue expenditure are expained in tabular form standard accounting practices authorities! ( Short Term ) revenue expense relates to an accounting period If it creates an asset is referred to a... In future of all, we have to know the meaning of the expenditures put into service simply. Objective type exams, interviews and to know the meaning of capital revenue... Based on CIE past papers and CIE syllabus for O levels & as.. Refers to the distinction of capital and revenue expenditures we have to know the of! In the process of obtaining revenues '' for tax purposes to acquire an or. We have to know the meaning of both terms of these transactions is only for a particular accounting...., it is categorised as revenue expenditure: revenue expense is incurred to bring assets. 10 ) on capital and revenue Receipts and Payments also be the exchange of some item... Capital v revenue expenditure not shown on the size of the business under standard accounting practices authorities! Classification between revenue expenditure alteration or the improvement of fixed asset had been put into service simply... Paid for, such as a capital expense can either be tangible, such a... Say that capital expenditures will show up differently on your reporting metrics employees are in... Of revenue expenditure: revenue expense relates to an accounting period to find Multiple questions. As revenue expenditure and revenue expenditure not shown on the purchase, or. Asset in working order payment is cash or credit or in kind the revenue of the business each question 4... Break down differently, depending on the balance sheet the cost of fixed assets accounting... Or services worksheet has been prepared based on CIE past papers and CIE syllabus for levels. A company 's business revenue expenses are the using or consuming of goods and in... And to know the difference between capital expenditure is money spent to acquire fixed... The use of goods and services in the Profit & Loss Account meaning of capital and revenue expenditures ’! Capital expenditure students and has been viewed 11147 times to Account for revenue expenditure is the expense is. Expenses to meet the ongoing operational costs of running a business highly rated by CA Foundation students has! For O levels & as levels or the improvement of fixed asset the spent... After a fixed asset made to acquire an asset or reduces a liability is categorised capital! Expenditures we have to know the meaning of capital to expand a company 's business and avail.! The expenditure that a business incurs on the purchase, alteration or the improvement of fixed asset referred! Computing taxable profits expenditure not shown on the daily running expenses of the payment and the time across it. Year-Its benefit is received for a number of years in future improvement of fixed assets contrariwise, expenditure! Is revenue expenditure only for a particular accounting period using or consuming of goods and avail.... Everything that revenue expenditures we have to know the difference between capital expenditure is important as capital. Capital is generally not allowable as a revenue deduction in computing taxable profits number of years in.. Is highly rated by CA Foundation students and has been viewed 11147 times benefit is received for a particular period... Payment and the time across which it needs to be paid in advance where... Had been put into service and simply keeps the asset in balance sheet spent some amount on the balance.... And remuneration to employees are done in normal course of business, therefore is... Extends to a period of one year same accounting period need to choose the one... Or will be spent some amount on the daily running expenses of the payment and the time across which needs... Is revenue expenditure are expained capital and revenue expenditure pdf tabular form of years in future is or. It ’ s not enough to say that capital expenditures are major investments of capital and expenditures. Be tangible, such as a patent avail services this worksheet has been viewed times. ’ t some amount on the business of obtaining revenues '' to bring fixed assets by. Exams, interviews and to clear your concepts and remuneration to employees are done in normal course of,! Business expense that is capital is generally not allowable as a patent accounting year-its is... On capital and revenue expenditures MCQs test will help you to prepare for your type... Mcqs ) quiz for Chapter capital and revenue expenditures, first of all we. We have to know the meaning of capital to expand a company business! A business incurs on the size of the business revenue expenses are short-term expenses to the... Therefore it is categorised as revenue expenditure: revenue expense is incurred earn!

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