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Akshipriya Negi Gaurav Gupta Partha Sanjana Bhatt Sheetal Verma Shoib Khan

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Sanjana Bhatt

There are two types of expenditures: capital expenditures and revenue expenditures. Capital expenditures provide benefits over multiple accounting periods by acquiring or improving assets, while revenue expenditures only provide benefits within a single period through normal business operations and maintenance. Some examples of capital expenditures include new equipment, building improvements, and long-term projects, while revenue expenditures consist of everyday operating costs like salaries, raw materials, and regular repairs. The key distinction is that capital expenditures generate profits over many years through depreciation, while revenue expenditures directly reduce profits in the period they are incurred.

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Akshipriya Negi Gaurav Gupta Partha Sanjana Bhatt Sheetal Verma Shoib Khan

Uploaded by

Sanjana Bhatt
23 views14 pages
There are two types of expenditures: capital expenditures and revenue expenditures. Capital expenditures provide benefits over multiple accounting periods by acquiring or improving assets, while revenue expenditures only provide benefits within a single period through normal business operations and maintenance. Some examples of capital expenditures include new equipment, building improvements, and long-term projects, while revenue expenditures consist of everyday operating costs like salaries, raw materials, and regular repairs. The key distinction is that capital expenditures generate profits over many years through depreciation, while revenue expenditures directly reduce profits in the period they are incurred.

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There are two types of expenditures: capital expenditures and revenue expenditures. Capital expenditures provide benefits over multiple accounting periods by acquiring or improving assets, while revenue expenditures only provide benefits within a single period through normal business operations and maintenance. Some examples of capital expenditures include new equipment, building improvements, and long-term projects, while revenue expenditures consist of everyday operating costs like salaries, raw materials, and regular repairs. The key distinction is that capital expenditures generate profits over many years through depreciation, while revenue expenditures directly reduce profits in the period they are incurred.

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23 views14 pages

Akshipriya Negi Gaurav Gupta Partha Sanjana Bhatt Sheetal Verma Shoib Khan

Uploaded by

Sanjana Bhatt
There are two types of expenditures: capital expenditures and revenue expenditures. Capital expenditures provide benefits over multiple accounting periods by acquiring or improving assets, while revenue expenditures only provide benefits within a single period through normal business operations and maintenance. Some examples of capital expenditures include new equipment, building improvements, and long-term projects, while revenue expenditures consist of everyday operating costs like salaries, raw materials, and regular repairs. The key distinction is that capital expenditures generate profits over many years through depreciation, while revenue expenditures directly reduce profits in the period they are incurred.

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By :

Akshipriya Negi Gaurav Gupta Partha Sanjana Bhatt Sheetal Verma Shoib Khan

Payment of cash or cash-equivalent for goods or services, or


a charge against available funds in settlement of an obligation as evidenced by an invoice, receipt, voucher, is known as expenditure. Expense is basically the expired cost, directly or indirectly related to given fiscal period of the flow of goods or services into the market and of related operations.

There are 2 types of expenditure : 1. Capital Expenditure 2. Revenue Expenditure

Capital Expenditure consists of expenditure, the benefit of which is

not fully enjoyed in one accounting period but spread over several
accounting periods. It includes assets acquired for the purpose of earning income or increasing the earning capacity of business or effecting economy in the operation of an asset. Expenditure incurred for improving assets and extending an existing asset is also called capital expenditure.

Interest on capital paid during the period of construction of the company. Expenditure incurred in the installation of an asset. Expenditure incurred for putting the old asset purchased, into working condition. Financing charges paid, brokerage and commission paid. Additions and extensions made to the existing assets. Betterment of fixed assets to produce more so as to improve its earning capacity.

Benefit of capital expenditure


does not exhaust in one year but extends over a number of

years of its use.

Revenue expenditure is the expenditure incurred in one period of accounting, the full benefit of which is enjoyed in that period only. It does not increase the earning capacity of business but it is incurred in order to maintain the existing earning capacity of the

business.
It includes all the expenses which arise in normal course of business.

The benefit of such expenditure is for short period.

Purchase of raw materials for conversion into finished goods.


Selling and distribution expenses incurred for sale of finished goods. Establishment expenses like salaries, wages, rent, rates, taxes, insurance, depreciation on office equipment. Depreciation on plant, machinery and office equipment. Expenses incurred in order to maintain the existing fixed assets in an efficient and workable state such' as repairs to building, repairs to plant, white-washing and painting of building.

Benefit of revenue expenditure


exhausts within one period only and is not extended over a number of years.

The money spent to gain long term benefit i.e., more than 1 year is
capital expenditure. The money is basically spent to buy things which will produce current assets. Whereas the money spent to gain short term benefit i.e., less than 1 year is revenue expenditure. The money is basically spent on things which will be sold after being produced.

Capital Expenditures Its effect is long term i.e., it is not exhausted within the current account year. Its benefit is enjoyed in future year or years also. In a word, its effect is reduces gradually.

Revenue Expenditures Its effect is temporary, i.e., it is exhausted within the current accounting year.

An asset is acquired or the value of an asset is increased as a result of this expenditure.

Neither an asset is acquired nor the value of an asset is increased.

It does not occur again and again - It occurs repeatedly - It is recurring it is non-recurring and irregular. and regular.

Generally, it has physical existence i.e., it can be seen with eyes.

It has no physical existence, i.e., it cannot be seen with eyes.

Capital Expenditures
This expenditure improves the position of the concern
A portion of this expenditure is shown in the trading and profit and loss account or income and expenditure account as depreciation.

Revenue Expenditures
This expenditure helps to maintain the concern
The whole amount of this expenditure is shown in trading and profit and loss account or income and expense account. But deferred revenue expenditures and prepaid expenses are not shown

It appears in balance sheet until its benefit is fully exhausted.

It does not appear in balance sheet. Deferred revenue expenditure, outstanding expenditure, outstanding expenses and prepaid expenses, however, temporarily shown in the balance sheet

It does not reduce the revenue of the concern. Purchase of fixed assets does not effect revenue.

It reduces revenue. Payment of salaries to employees decreases revenue

Capital Expenditure is therefore of non recurring nature and

consists of items for which profit is generated over a long period of


time. The item is depreciated from time to time and the depreciated amount is added to the income statement which

thereby generates profits.

Revenue Expenditure is the cost of day to day expenses for running of business. It is charged against profit in the income statement in the year it is expensed.

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