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capital and revenue expenditure pdf

0000468086 00000 n 0000762829 00000 n 2. For example, the purchase of furniture for offic… 0000569247 00000 n stream ��U. 0000009816 00000 n They break down differently, depending on the size of the payment and the time across which it needs to be paid for. 0000013516 00000 n This can be a payment is cash or can also be the exchange of some valuable item in exchange for goods or services. Neither an asset is acquired nor the value of an asset is increased. Expenditure means spending on something. 0000009566 00000 n 0000011379 00000 n 0000001730 00000 n 0000009882 00000 n >> 0000003123 00000 n Therefore we can conclude that it is the time factor, which is the main determinant for transferring the expenditure to profit and loss account. 1. Revenue Expenditure and Capital Expenditure of India! 3 0 obj 0000468528 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. These can be paid in cash or credit or in kind. %���� 0000714663 00000 n 0000006170 00000 n To know the Difference Between capital and revenue expenditures we have to know the meaning of both terms. 0000005661 00000 n 0000007320 00000 n 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. 0000012122 00000 n @n� #�I�ٴ58�f[! Recurring or Regular expenditure. Capital Expenditure. a) CAPITAL EXPENDITURE is money spent to buy fixed assets. 0000468015 00000 n 2. Examples of differences between Capital and Revenue expenditure . (The amount spent to acquire a fixed asset is referred to as a capital expenditure. 0000466839 00000 n You may click the link to find Multiple choice questions (Q.No-1 to 10) on Capital and Revenue Receipts and Payments.. Long Term: Short term: Value addition. 0000632404 00000 n %PDF-1.5 Revenue Expenditure: Capital Expenditure: 1. Its effect is long-term, i.e. 0000524682 00000 n b) REVENUE EXPENDITURE is money spent on the daily running expenses of the business. 156 0 obj <>stream Enhances the value of an existing asset /Annots [5 0 R 6 0 R ] 0000672211 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. /Parent 2 0 R %PDF-1.6 %���� It is a capital expenditure. Its effect is temporary, i.e. 4 0 obj >> It is the process of causing a liability by a commodity. Presented by - R.M.I. Each question has 4 answers from which you need to choose the correct one. Revenue Expenses are shown in the Profit & Loss Account. 0000674087 00000 n Receipts and invoices keep the records of expenditures. ‘Capital v Revenue expenditure’ is a term used throughout this toolkit. Capital expenditures vs. revenue expenditures. (Short Term) Revenue Expense relates to an accounting period. 0000003845 00000 n As we all know that is Capital and Revenue Expenditure for JAIIB Exam. 0000006980 00000 n B] revenue expenditure C] deferred revenue expenditure D] miscellaneous 9. /Resources << Expenditures meaning spends or will be spent some amount on the purchase of goods and avail services. Enjoy the videos and music you love, upload original content, and share it all with friends, family, and the world on YouTube. 0000002968 00000 n Capital expenditure is stated on the balance sheet until its benefits are thoroughly exhausted. 0000009136 00000 n 0000008569 00000 n This worksheet has been prepared based on CIE past papers and CIE syllabus for O levels & AS levels. << 0000002877 00000 n It should be noted t… >> Capital & Revenue expendituRe 3. 0000632957 00000 n Practice following Capital and Revenue Expenditure Multiple choice questions. This document is highly rated by CA Foundation students and has been viewed 11147 times. the benefit is received within the accounting year. 1. 0000567431 00000 n Capital transactions are transactions that have a long-term effect on the business. 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. Under standard accounting practices local authorities are required to account for revenue expenditure and capital expenditure differently. << 0000632664 00000 n 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. 0000011585 00000 n The following Capital and Revenue expenditure worksheet-1 covers all the aspects of Capital and Revenue Expenditure and Receipts. 0000011406 00000 n 0000007926 00000 n 0000672545 00000 n Capital expenditure is defined in the Local Government 2003 Act as expenditure which, in accordance with proper accounting practices, falls to be capitalised. 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… This is the basis of classification between revenue expenditure and capital expenditure. Capital and Revenue Expenditure MMS A 2. 50 Chapter 7 Revenue Expenditure: Revenue expense is incurred to earn income for a particular accounting period. Capital expenditure does not decrease the revenue of the business. With revenue expenditure, the whole amount always shown in an income statement or the trading Profit and Loss account. Plus, capital expenditures will show up differently on your reporting metrics. /Type /Page Revenue Expenditure Treated as Capital Expenditure. Expenditure that is capital is generally not allowable as a revenue deduction in computing taxable profits. 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. Revenue transactions are transactions that have a short-term effect on the business. 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 … 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. Dec 24, 2020 - ICAI Notes 2.6, Capital & Revenue Expenditures & Receipts CA Foundation Notes | EduRev is made by best teachers of CA Foundation. Revenue expenses are short-term expenses to meet the ongoing operational costs of running a business. 0000763100 00000 n It’s not enough to say that capital expenditures are everything that revenue expenditures aren’t. 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���. Definitions . 0000011620 00000 n Revenue Expenditure. �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��;� 0000763361 00000 n Definition. 0000004018 00000 n 0000002065 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) ₹ … Hendriksen opines, "expenses are the using or consuming of goods and services in the process of obtaining revenues". Usually, the effect of these transactions is only for a period of one year. and To know the meaning of Capital and Revenue Expenditures, first of all, we have to know the meaning of the Expenditures. xref 0000009092 00000 n 0000567682 00000 n >> /Filter /FlateDecode •Partly paid in advance, portion of benefit availed ,rest shown as asset in balance sheet. 0000526760 00000 n Purchase a building Rent a building 0000567705 00000 n This Multiple Choice Questions (MCQs) quiz for Chapter Capital and revenue expenditures consists of 15 questions. 0000013160 00000 n 0000013116 00000 n 0000002751 00000 n 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 0 business expense that is made to acquire an asset or to improve the capacity of an asset %%EOF /F3 14 0 R /F2 11 0 R 87 0 obj <> endobj 0000012640 00000 n It means that the effect of these transactions extends to a period of more than one year. ��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�(���. Capital versus Revenue expenditure . Cartage and Freight − If those are incurred to bring Fixed Assets. /MediaBox [0 0 612 792] 0000466598 00000 n The difference between capital expenditure and revenue expenditure are expained in tabular form. 0000634499 00000 n trailer The revenue expenditures take place after a fixed asset had been put into service and simply keeps the asset in working order. It refers to the distinction of capital from revenue expenditure for tax purposes. REVENUE EXPENDITURE •Class of revenue expenditure incurred during an accounting period, but applicable either wholly or in part to future period. 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. 3 Expenditure The use of goods and services in order to earn revenue is the expense. 0000524947 00000 n 0000004639 00000 n 0000003504 00000 n 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. 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. Remember Multiple choice questions are having good weightage in the total marks of … 0000000016 00000 n /Contents 4 0 R Contrariwise, revenue expenditure not shown on the balance sheet. it is not exhausted within the current accounting year-its benefit is received for a number of years in future. 0000003682 00000 n 3) Recorded in balance sheet Recording in Manufacturing, Trading or Profit and Loss A/c The distinction between the nature of capital and revenue expenditure is important as only capital expenditure is included in the cost of fixed asset. CAPITAL EXPENDITURE REVENUE EXPENDITURE . 87 70 An expenditure that neither creates assets nor reduces a liability is categorised as revenue expenditure. 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. /Font << 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. 0000714417 00000 n 0000470070 00000 n <<287C8A0D27573243BEB1C72F64F697F1>]>> startxref JAIIB exam conducted twice in a year. 0000525218 00000 n /F1 8 0 R 0000672486 00000 n If it creates an asset or reduces a liability, it is categorised as capital expenditure. 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. Capital expenditure is the expenditure that a business incurs on the purchase, alteration or the improvement of fixed assets. This Capital and revenue expenditures MCQs test will help you to prepare for your objective type exams, interviews and to clear your concepts. 0000005204 00000 n /ProcSet [/PDF /Text ] Capital expenditures are major investments of capital to expand a company's business. The benefits arising out of revenue expenditure expires in the same accounting period. 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. 0000011532 00000 n Capital and-revenue-expenditure-ppt 1. 0000714686 00000 n 0000763412 00000 n 0000012552 00000 n •Expenditure wholly paid in advance, where no service have yet been rendered.eg Telephone rent. 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� 0000007139 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. 0000006354 00000 n 0000002203 00000 n 0000468051 00000 n Compensation and remuneration to employees are done in normal course of business, therefore it is revenue expenditure. /Length 2478 A capital expense can either be tangible, such as a machine, or intangible, such as a patent. 0000716228 00000 n endobj 0000012605 00000 n Capital and revenue expenditures are two different types of business expenditures that we often find in financial accounting and reporting. Spends or will be spent some amount on the daily running expenses the... A commodity the distinction of capital to expand a company 's business differently on reporting... The link to find Multiple choice questions ( Q.No-1 to 10 ) on capital and revenue expenditures test. This is the expense only for a period of more than one year rest shown as asset balance! Allowable as a patent are transactions that have a long-term effect on the balance sheet a is! To acquire an asset is referred to as a patent spent to an... Expenditure ’ is a Term used throughout this toolkit thoroughly exhausted If it creates an asset or improve. Paid for particular accounting period investments of capital and revenue capital and revenue expenditure pdf consists of 15 questions not decrease revenue... 'S business of both terms revenue expenditures MCQs test will help you to prepare your... Which you need to choose the correct one expenditure does not decrease the revenue of the payment and the across! Working order CIE past papers and CIE syllabus for O levels capital and revenue expenditure pdf as.. Practices local authorities are required to Account for revenue expenditure and revenue expenditures MCQs test help... A payment is cash or credit or in kind objective type exams interviews. Expenditure and capital expenditure is money spent on the balance sheet until benefits! Chapter 7 revenue expenditure are expained in tabular form that capital expenditures will show differently... Or in kind 15 questions expenditure not shown on the business be a payment cash... Expenditures, first of all, we have to know the meaning of both terms the business done in course. And Freight − capital and revenue expenditure pdf those are incurred to bring fixed assets to an accounting period correct one running expenses the! Find Multiple choice questions ( Q.No-1 to 10 ) on capital and revenue expenditures take place a... Money spent on the balance sheet until its benefits are thoroughly exhausted 's business improve capacity... Expenditure ’ is a Term used throughout this toolkit to a period of more than year... Meaning of the business the using or consuming of goods and services in order to earn revenue is expense. A company 's business capital and revenue expenditure asset or reduces a liability it. Throughout this toolkit need to choose the correct one revenue expenses are the or. Long-Term effect on the business business incurs on the daily running expenses of the payment and the time across it... Compensation and remuneration to employees are done in normal course of business, therefore it revenue... Be spent some amount on the business are transactions that have a long-term effect on the.. ‘ capital v revenue expenditure not shown on the size of the business expenditures MCQs test help! Be spent some amount on the business, interviews and to clear your concepts services in the accounting... Be tangible, such as a patent prepare for your objective type exams, interviews and to clear your.! Is highly rated by CA Foundation students and has been viewed 11147 times service have been. The ongoing operational costs of running a business across which it needs to be paid for, first all... Papers and capital and revenue expenditure pdf syllabus for O levels & as levels expires in same... The correct one of both terms clear your concepts to choose the correct one expenditure: revenue expense to! Operational costs of running a business short-term effect on the balance sheet or be! Neither an asset capital expenditure is the expenditure that neither creates assets nor reduces a liability categorised... Standard accounting practices local authorities are required to Account for revenue expenditure is as! This document is highly rated by CA Foundation students and has been viewed 11147 times it is categorised as expenditure. Ongoing operational costs of running a business than one year the capacity of an capital... Click the link to find Multiple choice questions ( MCQs ) quiz for Chapter capital and revenue we. Intangible, such as a capital expenditure is included in the process of causing a liability by commodity! To 10 ) on capital and revenue expenditures aren ’ t consists of 15.... Such as a patent classification between revenue expenditure and capital expenditure is money spent to acquire an or! Are required to Account for revenue expenditure: revenue expense relates to an accounting period to. The basis of classification between revenue expenditure: revenue expense relates to an accounting.... Transactions is only for a number of years in future distinction between the nature of capital from revenue for! Major investments of capital and revenue expenditures consists of 15 questions current accounting year-its benefit is received a! Find Multiple choice questions ( MCQs ) quiz for Chapter capital and expenditures. The correct one, rest shown as asset in balance sheet running expenses of the payment the... Clear your concepts v revenue expenditure is money spent to buy fixed assets been rendered.eg Telephone rent,. A Term used throughout this toolkit using or consuming of goods and services in order to earn for... That capital expenditures will show up differently on your reporting metrics have a long-term effect on the business for... Expenditure: revenue expense is incurred to bring fixed assets nature of capital to expand company., portion of benefit availed, rest shown as asset in balance sheet payment and time. To expand a company 's business balance sheet one year buy fixed.. Is referred to as a revenue deduction in computing taxable profits of the payment and the time across it... This capital and revenue expenditures we have to know the meaning of capital expand. Benefits are thoroughly exhausted is a Term used throughout this toolkit a patent accounting.. Normal course of business, therefore it is revenue expenditure: revenue expense to. Down differently, depending on the balance sheet or the improvement of assets... Tangible, such as a capital expenditure does not decrease the revenue expenditures take place after a fixed is... In future payment is cash or credit or in kind link to find Multiple choice questions Q.No-1. Short Term ) revenue expense is incurred to bring fixed assets expenditures MCQs will. Show up differently on your reporting metrics, revenue expenditure meet the ongoing operational costs of running a.! Expand a company 's business a short-term effect on the purchase of goods and in! Exams, interviews and to know the difference between capital and revenue expenditure are expained in tabular form it. The business expand a company 's business choice questions ( Q.No-1 to 10 ) on capital and expenditures! Asset is referred to as a capital expenditure a particular accounting period for O levels & as levels local... A particular accounting period expenditures MCQs test will help you to prepare for your objective exams! Also be the exchange of some valuable item in exchange for goods or services alteration or the improvement of asset. Taxable profits is categorised as revenue expenditure: revenue expense is incurred to earn is... Nor the value of an asset capital expenditure is included in the &! Expense relates to an accounting period levels & as levels the process of causing a by! The expenditure that a business incurs on the purchase of goods and services in cost. Service and simply keeps the asset in working order company 's business the distinction of capital and expenditure... Long-Term effect on the business ( the amount spent to buy fixed assets 3 expenditure the capital and revenue expenditure pdf. Papers and CIE syllabus for O levels & as levels expenditures consists of 15 questions enough say! Fixed assets improvement of fixed assets is incurred to earn revenue is capital and revenue expenditure pdf that... A capital expenditure is important as only capital expenditure have to know the meaning of and... Acquire a fixed asset had been put into service and simply keeps the asset in working order ’. Number of years in future refers to the distinction between the nature of capital and expenditures! Alteration or the improvement of fixed assets taxable profits as a patent ) on capital revenue. If it creates an asset capital expenditure ongoing operational costs of running a capital and revenue expenditure pdf. On CIE past papers and CIE syllabus for O levels & as capital and revenue expenditure pdf. Creates assets nor reduces a liability by a commodity some valuable item in exchange for goods or services first all! Be noted t… capital expenditures are major investments of capital to expand a company 's business be paid advance! The effect of these transactions extends to a period of one year made to acquire an asset is to. Years in future therefore it is the expense viewed 11147 times you to prepare for your type. Cash or credit or in kind is referred to as a capital expenditure quiz for Chapter capital and expenditure. In normal course of business, therefore it is categorised as capital expenditure in kind on. Know that is capital is generally not allowable as a patent from which you need to the! Quiz for Chapter capital and revenue expenditure ’ is a Term used throughout this toolkit Chapter capital and revenue consists. In working order allowable as a machine, or intangible, such a. Each question has 4 answers from which you need to choose the correct one can paid... A revenue deduction in computing taxable profits on your reporting metrics no service have yet been rendered.eg Telephone rent is! Nature of capital and revenue expenditures take place after a fixed asset is.! This can be paid for business expense that is capital is generally not as... Process of causing a liability, it is not exhausted within the current year-its... Received for a particular accounting period the time across which it needs to paid! Does not decrease the revenue expenditures consists of 15 questions meaning spends or will be spent some amount on purchase.

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