Capital and Revenue Expenditure

Capital Expenditure: This is the amount spent on the acquisition of a non-current asset or adding value to a non-current asset.
Examples of expenses incurred in acquisition:

  1. Purchase price/cost of the asset.
  2. Delivery/carriage inwards costs (e.g. shipping charges or import taxes).
  3.  Costs incurred to get the asset in use (e.g. assembly, testing)
  4. Installation
  5. Demolition costs in order to construct a new building.
  6. Architect fees for construction and supervision
  7. Legal fees incurred in acquisition of a new asset (e.g. lease agreement)

Examples of expenses incurred in adding value to an asset:

  1. Modify plant to increase its useful life.
  2. Upgrading plant to improve quality of output.
  3. Adopting or upgrading the production process to improve or reduce costs.

Revenue Expenditure: There’s an amount spent by the firm in the normal trading process or to assist in earning revenues or income. Examples:

  1. Postage and stationery.
  2. Carriage outwards (sales).
  3. Repairs and maintenance.
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