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Capital Revenue Expenditure
Capital Revenue Expenditure
Revenue expenditure
1.
It
is incurred for acquiring fixed as- 1. It is incurred for acquiring or producsets intended for use in business.
ing goods for sale.
2. It is intended to extend or improve 2. It is intended to maintain the fixed
the fixed assets.
assets in a good working condition.
3. It increases revenue earning capacity3. It does not increase revenue earning
of a concern.
capacity of a concern.
4. Benefit of this expenditure extends 4. It intends to benefit current periods
for more than one year.
only.
5. It is not a loss to a concern.
5. It is a loss to a concern.
6. It is shown in balance sheet.
6. It is shown in Revenue account.
Capital Receipts: Capital receipts are those receipts which do not recurred. They
are of an unusual in nature and not arising through normal activities of the
business. For example, amount received on account of issue of fresh share
capital, Debentures, amount of loans raised, proceeds on sale of fixed assets,
Deposits, premium on shares and debentures etc.
Revenue Receipts: Revenue receipts are those items of income which are received
or occurred in the ordinary course of business. For example, cash received on
account of sales, discount received, commission received, interest and dividend
on investments, transfer fees etc. Revenue receipts are credited to profit or loss
account where as the Capital receipts will affect the balance sheet.
PROBLEMS.
I. Classify them into capital, revenue or deferred revenue expenditure
1. Legal expenses incurred in connection with issue of equity share of the
company.
2. Cost of replacement of a defective part of the machinery.
3. Expenditure incurred in preparing a project report.
4. Expenditure for training employees for better running of the machinery.
5. Purchase of a machinery for sale.
6. Daily wages paid to an office peon.
7. Payment for purchase of goods.
8. Payment for purchase of stationery.
9. Payment for purchase of a car.