Docsity
Docsity

Prepare for your exams
Prepare for your exams

Study with the several resources on Docsity


Earn points to download
Earn points to download

Earn points by helping other students or get them with a premium plan


Guidelines and tips
Guidelines and tips

Capital and revenue expenditure, Study notes of Accounting

The importance of distinguishing between capital and revenue items in accounting. It describes the various capital and revenue items, including capital expenditure and revenue expenditure, and their accounting treatment. The document emphasizes the need for correct classification of items to ensure accurate preparation of trading and profit and loss account and balance sheet. It also explains the difference between capital and revenue expenditure and their benefits. useful for accounting students and professionals who want to understand the basics of capital and revenue items in accounting.

Typology: Study notes

2019/2020

Available from 10/06/2022

kiran-avni
kiran-avni 🇮🇳

9 documents

1 / 6

Toggle sidebar

This page cannot be seen from the preview

Don't miss anything!

bg1
CapitalandRevenueItems
Isimportanttomakeacleardistinction
betweenitemsofcapitalnatureandrevenue
natureforthepreparationoftradingandprofit
andlossaccountandthebalancesheet,Ifany
itemiswronglyclassified,Aeifanyitemof
revenuenatureistreatedascapitalitem orvice-
versa,theascertainmentofprofitorlosswillbe
incorrect.
Thevariouscapitalandrevenueitemsareasfollows
CapitalExpenditure
Itismoneyspentonthepurchaseofpermanent
orfixedassetforuseinthebusinessandnot
forimmediateresaleoronthepermanent
improvementoforadditiontoorextensionof
anexistingassetwithaviewtoincrease
pf3
pf4
pf5

Partial preview of the text

Download Capital and revenue expenditure and more Study notes Accounting in PDF only on Docsity!

CapitalandRevenueItems

Isimportanttomakeacleardistinction betweenitemsofcapitalnatureandrevenue natureforthepreparationoftradingandprofit andlossaccountandthebalancesheet,Ifany item iswronglyclassified,Aeifanyitem of revenuenatureistreatedascapitalitem orvice- versa,theascertainmentofprofitorlosswillbe incorrect. Thevariouscapitalandrevenueitemsareasfollows CapitalExpenditure Itismoneyspentonthepurchaseofpermanent orfixedassetforuseinthebusinessandnot forimmediateresaleoronthepermanent improvementoforadditiontoorextensionof anexistingassetwithaviewtoincrease

theearningcapacityofthebusinessenterprise. ¢.g.Purchaseofplantandmachineryetc. Capitalexpenditureasopposedtorevenue expenditure,isgenerallyofaone-offkindand itsbenefitisderivedoverseveralaccounting periods.Capitalexpendituremayinclude purchasecost,deliverycosts,legalcharges, installationcosts,upgradationcostsand replacementcosts. Ascapitalexpenditureresultsinincreaseinthe fixedassetoftheentity,theaccountingentryis asfollows DebitFixedAssetsCreditToCash/Payable

RevenueExpenditure

Itismoneyspenton

materialsandservices,

whichareconsumedbya

businessenterprisein

carryingoutnormalbusiness

activitiesandmaintenance

offixedassets.Thedirect

benefitofsuchexpenditure

isexhaustedinthe

accountingperioditself.eg.

costoffinishedgoodsor

establishmentcostetc.

Revenueexpenditures

compriseofrepaircosts,

maintenancecharges,

repaintingcosts,renewal

expenses.Asrevenuecosts

donotform partofthefixed

assetcost,theyare

expensedintheincome

statementintheperiodin

whichtheyareincurred.