Types of

expenses

Capital Revenue
expenditure expenditure
 Capital expenditure
• Which results in the acquisition of non-current
assets, or an improvement in their earning
capacity.
• Appearance of a non-current in the statement of
financial position of the business.
• Not charged as expense in the statement of
profit or loss.
• Directly attributable costs such as initial delivery
costs ,installation costs and professional fees.
 Revenue expenditure
• For the purpose of the trade of the business
• Classified as selling and distribution
expenses,adminstration expenses and finance
charges
• Maintain the existing earning capacity of
non-current assets, eg repairs to non-current
assets
• Capital expenditures are typically a larger
amount than revenue expenditures. However,
there are exceptions when large asset
purchases are consumed in the short term or
in the current period.
• Capital expenditure as expenditure that
provides long-term benefits and revenue
expenditure as trading costs relating to short-
term.
 Acquisition of Non Current Assets
• When a non-current asset is acquired, the
double-entry is:
Dr Non-Current Asset
Cr Cash/Payables
Tangible non-current assets should initially be
recorded at cost.
 Disposal of non-current assets
• When a non-current asset is sold, the ledger
accounting entries are as follow:
i. Dr Disposal of non-current asset
Cr Non-current asset
with the cost of the asset disposed of.
ii. Dr Accumulated depreciation
Cr Disposal of non-current asset
with the accumulated depreciation on the asset as
at the date of sale.
iii. Dr Cash/ Receivable
Cr Disposal of non-current asset
with the sale price of the asset.
• there is likely to be a profit or loss on disposal.
This is the difference between the net sale
price of the asset and its net book value at the
time of disposal.
If:
Sales proceeds > NBV → profit on disposal
Sales proceeds < NBV → loss on disposal