Week

Week99
Capital expenditure and revenue expenditure

Learning Objectives
1. Capital expenditure vs. revenue expenditure

P3
Differences between capital expenditure and revenue
expenditure

Capital expenditure Revenue expenditure

• Expenditures for non- • Expenditures that

current assets that provides benefits to
provides benefits to the business for only
the business for more the current
than one accounting accounting period
period • Salaries and wages,
• Purchase of land, rent, maintenance
building, equipment cost, motor repair
 CAPITAL EXPENDITURES
What?
• When business spends
money to:
– Buy non-current assets &
bring it into working
condition,
– Add to the value to an
existing non-current asset i.e.
increase performance or life,
of a non-current asset
Examples
• Buy non-currents assets
Eg: buy machines
• Cost of bringing (carriage
inwards) non-current assets
into business
Eg: Custom duty
• Legal costs for buying a
building
• Any other costs to make non-
current assets ready for use
Eg: Installation of machine
 REVENUE EXPENDITURES
What? Examples
• Expenditures incurred for: • Examples
– Running the day-to-day – Repairs of furniture
business – Painting of building
– Maintain the assets in – Purchase of stationery
working conditions – Salaries
Capital or Revenue Expenditure?

Extension or addition to
buildings
Capital
Expenditure
Capital or Revenue Expenditure?

Ink cartridges

Revenue
Expenditure
Capital or Revenue Expenditure?

Office Equipment

Capital
Expenditure
Capital or Revenue Expenditure?

Salaries

Revenue
Expenditure
Capital or Revenue Expenditure?

New factory

Capital
Expenditure