Module 2: Capital & Revenue Expenditure

Classify the following expenditure/income into capital and revenue

with reasons:

1. Purchase of Building

2. Legal fees paid for assessing title deeds for purchase of building

3. Salaries paid to staff

4. Expenses incurred for advertising the company’s product in

local newspaper

5. Expenses incurred for shifting the raw materials from one go-
down to another

6. Replacement of a worn out part of machinery with a new part,

increasing the working capacity of machinery

7. The coal fired engine broke down and it was replaced with a
gas fired one.

8. Freight paid on purchase of machinery

9. Installation and commissioning charges paid for erection of

machinery

10. Built an extension to the factory building

11. Repair expenses incurred on new machinery before installation.

12. Purchase of second hand furniture

13. Interest paid on loan taken for the purchase of machinery. The
commercial production has not yet begun as the machine is not
yet ready for its intended use

14. Interest paid on loan taken for purchase of Raw materials

15. Transport charges paid for purchase of furniture

16. Transport charges paid for purchase of Raw materials

17. Temporary shed erected for storing materials for construction

of building

18. Payment made to security agencies for guarding the factory

building

19. Annual maintenance charges paid for computers

20. Sale of goods

21. Money raised by issue of Equity Shares

22. Expenses incurred by a pharmaceutical company on research

activities.

23. Paid Rs. 10 lakh to Chetan Bhagat for buying copyright in his
new book