CHAPTER 17

CAPITAL AND REVENUE EXPENDITURE AND RECEIPTS

Question 1

Electricity charges – revenue expenditure – benefit to business is short-lived (less

than one year)
Office furniture – capital expenditure – benefit to business is long lasting (more than
one year)
Interest charges – revenue expenditure – benefit to business is short-lived (less than
one year)
Shelving for shop - capital expenditure – benefit to business is long lasting (more
than one year)
Repairs to delivery van – revenue expenditure – benefit to business is short-lived
(less than one year)

Question 2

Telephone charges – revenue expenditure – benefit to business is short-lived (less

than one year)
Staff wages – revenue expenditure – benefit to business is short-lived (less than one
year)
Delivery vehicle – capital expenditure – benefit to business is long lasting (more than
one year)
Maintenance charges on office equipment – revenue expenditure – benefit to
business is short-lived (less than one year)
Computer printer – capital expenditure – benefit to business is long lasting (more
than one year)

Question 3

CAPITAL EXPENDITURE REVENUE EXPENDITURE

$ $
Computer hardware 900 Printer cartridge 24
Computer software 170 Paper for printer 30
Computer printer 140 54
1 210

Question 4

CAPITAL EXPENDITURE REVENUE EXPENDITURE

$ $
Second-hand catering equipment 1 080 Servicing charges 340
Upgrade of second-hand equipment 230 Redecoration 440
Carriage for delivering second-hand equipment 90 780
1 400
Question 5

Rent from tenant – revenue receipt – benefit to business will be short-lived (less than
on year)
Week’s cash takings – revenue receipts – benefit to business will be short-lived (less
than on year)
Additional investment by Philo – capital receipt – benefit to business will be long
lasting (more than one year)
Loan from a friend repayable in 2016 – capital receipt – benefit to business will be
long lasting (more than one year)

Question 6

Investment interest – revenue receipt – benefit to business will be short-lived (less

than on year)
Furniture provided by owner – capital receipt – benefit to business will be long lasting
(more than one year)
Cash sales – revenue receipt – benefit to business will be short-lived (less than on
year)
Bank loan – capital receipt – benefit to business will be long lasting (more than one
year) (assuming loan is not repayable within one year)

Question 7
Expenditure Receipt
Capital Revenue Capital Revenue
Paid for extension to office block 
Bank loan arranged to pay for extension 
Rent received from tenant using part of 
new office block
Paid wages of office staff 
Paid for installation of air conditioning in 
new office block

Question 8
Expenditure Receipt
Capital Revenue Capital Revenue
Purchased furniture for resale 
Mumtaz made an additional investment 
in the business from private funds
Purchased furniture for use in the 
business’s accounts office
Sold furniture in the showroom to a credit 
customer
Sold some unwanted office furniture for 
cash
EXAM-STYLE QUESTIONS

Q Ans Q Ans Q Ans Q Ans Q Ans

9 B 10 A 11 D 12 C 13 A
14 D 15 B 16 A

Question 17

(a) Revenue expenditure is payments on running costs, i.e. those items which are
of short-term benefit to the business (lasting less one year).
(b) Examples of revenue expenditure could include: shop rent, wages of
assistants, electricity charges, water charges, insurance, office administration
costs, etc.
(c) Profit is $6000 (i.e. loss $5000 add back error $11 000).
(d) Errors in an income statement will mean that the reported profit or loss for the
business will be incorrect. The owner of a business will make many decisions
based on this figure because it is an important indicator of the success of the
business. If the reported profit or loss is incorrect, the owner’s decisions are
likely to be incorrect also. The incorrect decisions could adversely affect the
business’s future performance.