Capital Expenditures
The expenditures which generates revenue or income is called capital expenditure. Capital expenditure incurred either for buying permanent assets or for improving their exiting working capacity. Capital expenditure helps in increasing production volume or decreasing cost of production. Such expenditures are shown on the asset side of balance sheet.
Items relating to capital expenditure
* Expenditure incurred in buying transporting and installing a permanent asset.
* Expenditure incurred in overhauling and installing an old asset to put it in production process.
* Cost of registration and legal charges incurred in buying or constructing a permanent assets.
* Expenditure incurred in improving or extending the working capacity of an existing asset.
* Expenditure incurred in getting benefits over a number of years.
* Expenditure incurred in raising capital like brokerage and commission for underwriting shares and debentures.
Revenue Expenditures
Any expenditure incurred in connection with the operation and administration of daily activities of the business is called revenue expenditure. Revenue expenditure is incurred for maintaining earning capacity and working efficiency of the fixed assets. Revenue expenditure is incurred for acquiring merchandise for resale either in its original or improved form. Its benefit expires within a year. Revenue expenditure is shown on debit side of the trading and profit and loss accounts.
Items relating to revenue expenditure
* Expenditure incurred in acquiring raw materials for manufacturing process or finished goods for resale.
* Wages and all other items of manufacturing expenses
* All items of office, administration, selling and distribution expenses
* Repair, maintenance, and depreciation of all the fixed assets.
* Interest on loan and other financial expenses.
The expenditures which generates revenue or income is called capital expenditure. Capital expenditure incurred either for buying permanent assets or for improving their exiting working capacity. Capital expenditure helps in increasing production volume or decreasing cost of production. Such expenditures are shown on the asset side of balance sheet.
Items relating to capital expenditure
* Expenditure incurred in buying transporting and installing a permanent asset.
* Expenditure incurred in overhauling and installing an old asset to put it in production process.
* Cost of registration and legal charges incurred in buying or constructing a permanent assets.
* Expenditure incurred in improving or extending the working capacity of an existing asset.
* Expenditure incurred in getting benefits over a number of years.
* Expenditure incurred in raising capital like brokerage and commission for underwriting shares and debentures.
Revenue Expenditures
Any expenditure incurred in connection with the operation and administration of daily activities of the business is called revenue expenditure. Revenue expenditure is incurred for maintaining earning capacity and working efficiency of the fixed assets. Revenue expenditure is incurred for acquiring merchandise for resale either in its original or improved form. Its benefit expires within a year. Revenue expenditure is shown on debit side of the trading and profit and loss accounts.
Items relating to revenue expenditure
* Expenditure incurred in acquiring raw materials for manufacturing process or finished goods for resale.
* Wages and all other items of manufacturing expenses
* All items of office, administration, selling and distribution expenses
* Repair, maintenance, and depreciation of all the fixed assets.
* Interest on loan and other financial expenses.
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