capital and revenue expenditure pdf

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0000632957 00000 n d5�[>yb� ��A�h��^�|��� 5��:521�?^;��das�SwlOY�c�*�:�{@e%q8P'�^�Ǡ��-���1�dϴiL�G��$T�c�eH����J�OZ�]~�s��_6�=m����N�܊E�����)B� 0000526760 00000 n Revenue transactions are transactions that have a short-term effect on the business. Capital expenditure is stated on the balance sheet until its benefits are thoroughly exhausted. The following Capital and Revenue expenditure worksheet-1 covers all the aspects of Capital and Revenue Expenditure and Receipts. To know the Difference Between capital and revenue expenditures we have to know the meaning of both terms. a) CAPITAL EXPENDITURE is money spent to buy fixed assets. An expense is a word very similar to expenditure but expense shows the deduction in the value of the asset while expenditure simply denotes the obtaining of as… This Multiple Choice Questions (MCQs) quiz for Chapter Capital and revenue expenditures consists of 15 questions. Compensation and remuneration to employees are done in normal course of business, therefore it is revenue expenditure. 0000466598 00000 n Capital Expenditure. 0000672545 00000 n Revenue Expenditure: Capital Expenditure: 1. Each question has 4 answers from which you need to choose the correct one. 0000632404 00000 n REVENUE EXPENDITURE •Class of revenue expenditure incurred during an accounting period, but applicable either wholly or in part to future period. Recurring or Regular expenditure. Expenditures meaning spends or will be spent some amount on the purchase of goods and avail services. Capital & Revenue expendituRe 3. TVS limited received a subsidy of Rs 1 crore from the central government is a A] Revenue receipt B] Revenue expenditure C] Capital expenditure D] Capital receipt 10. The benefits arising out of revenue expenditure expires in the same accounting period. For example, a business might purchase a property in which to house a new production facility or an item of plant and machinery to be used in the manufacture of its products. Capital transactions are transactions that have a long-term effect on the business. 0000524682 00000 n Cartage and Freight − If those are incurred to bring Fixed Assets. 0000002968 00000 n 1.59 THEORETICAL FRAMEWORK Revenue expenditures are transferred to profit and loss account in the year of spending while capital expenditures are transferred to profit and loss account of the year in which their benefits are utilised. 0000003123 00000 n 0000011532 00000 n For example, the purchase of furniture for offic… This is the basis of classification between revenue expenditure and capital expenditure. It should be noted t… 0000011406 00000 n Revenue expenses are short-term expenses to meet the ongoing operational costs of running a business. 0000012122 00000 n You may click the link to find Multiple choice questions (Q.No-1 to 10) on Capital and Revenue Receipts and Payments.. 0000763361 00000 n Capital expenditure does not decrease the revenue of the business. /F2 11 0 R 0000524947 00000 n Revenue Expenses are shown in the Profit & Loss Account. 3) Recorded in balance sheet Recording in Manufacturing, Trading or Profit and Loss A/c Under standard accounting practices local authorities are required to account for revenue expenditure and capital expenditure differently. 87 0 obj <> endobj Capital expenditures vs. revenue expenditures. /Type /Page (The amount spent to acquire a fixed asset is referred to as a capital expenditure. Capital and revenue expenditures are two different types of business expenditures that we often find in financial accounting and reporting. 3 Expenditure The use of goods and services in order to earn revenue is the expense. it is not exhausted within the current accounting year-its benefit is received for a number of years in future. Definitions . 0000632664 00000 n /Font << @n� #�I�ٴ58�f[! /Contents 4 0 R Examples of differences between Capital and Revenue expenditure . 0000674087 00000 n 0000005661 00000 n 0000468528 00000 n trailer >> Hendriksen opines, "expenses are the using or consuming of goods and services in the process of obtaining revenues". Capital expenditure relates to expenditure on non-current assets which are held for use within the business and not for resale as part of the trade of the business. 0000634499 00000 n <<287C8A0D27573243BEB1C72F64F697F1>]>> 0000525218 00000 n 0000011585 00000 n This Capital and revenue expenditures MCQs test will help you to prepare for your objective type exams, interviews and to clear your concepts. 0000567431 00000 n 0000714686 00000 n ��3�_u��(RѪڲ0�Qh����A 3=E��rh�jDj�+�'!�G���.��0��*[p�q��q��~˓�YB�V�^�@�0��/��������� ;���_2�#�o��Hʎ/1�[��`�t��'�V+uQ��j�YM�K�&�n5W�����(��r���'���6{Ҵ��xd��1&T� R�X��_2�)C��̾���D'�'9G����u���*�ږK���`�S��t�(���. /Parent 2 0 R Expenditure that is capital is generally not allowable as a revenue deduction in computing taxable profits. Capital expenditure is the expenditure that a business incurs on the purchase, alteration or the improvement of fixed assets. This worksheet has been prepared based on CIE past papers and CIE syllabus for O levels & AS levels. 0000012640 00000 n Its effect is temporary, i.e. >> 0000763412 00000 n As we all know that is Capital and Revenue Expenditure for JAIIB Exam. 0000468051 00000 n 0000004018 00000 n << 0000009136 00000 n IDEAL / CPT / ACCOUNTS / CAPITAL & REVENUE EXPENDITURE 51 Capital and Revenue Expenditure Capital Revenue 1) Long Term benefit Short Term benefit (Maximum 12 months) 2) Non-recurring or One time expenditure. 0000012552 00000 n Capital versus Revenue expenditure . %PDF-1.6 %���� 1. Dec 24, 2020 - ICAI Notes 2.6, Capital & Revenue Expenditures & Receipts CA Foundation Notes | EduRev is made by best teachers of CA Foundation. 0000002751 00000 n 0000470070 00000 n It is the process of causing a liability by a commodity. These can be paid in cash or credit or in kind. 0000005204 00000 n /F1 8 0 R The revenue expenditures take place after a fixed asset had been put into service and simply keeps the asset in working order. Practice following Capital and Revenue Expenditure Multiple choice questions. 0000012605 00000 n It is a capital expenditure. Capital expenditure is defined in the Local Government 2003 Act as expenditure which, in accordance with proper accounting practices, falls to be capitalised. 0000007139 00000 n Purchase a building Rent a building x^�Z�n9}�W���:M6՗y�&3�,A&�Y,�3�,Kޱ-�-��o�/��d[�eJ;"Xl�.��uk}�2������v>z��ʔ�ίFe�����V�7��+�JgM�v���?�����y>���\5���.���'�g�DkZ������h7��>4c�����I����_����Q%���g��x�2�Ab�UQ�R�,�DU�YݶŴ>�@Wfu���l�O��{��P��f��7�� �� ڷ��wy7��ڵ��� ?�J�˺h�H�=���K��.���~^�:"��A�8=�� :���֝,t���h���k��;��%|� x��?�)p��Id���֐�xS�'��:WRl'O ��hż�+��Tbe�4R�0䲅S7�� �yv�Q��t�W�$E�%�;潣d����崘:��[0'�m�@��gm�/]ja��\�k)4칀�[��,lW�{Xf����F:���˟[�g*���������,@�}�|v�����]�S���. /F3 14 0 R 0000672486 00000 n 0 Therefore we can conclude that it is the time factor, which is the main determinant for transferring the expenditure to profit and loss account. If it creates an asset or reduces a liability, it is categorised as capital expenditure. •Partly paid in advance, portion of benefit availed ,rest shown as asset in balance sheet. 0000001730 00000 n 0000003504 00000 n 0000762829 00000 n Expenditure means spending on something. /Length 2478 4 0 obj stream 0000006170 00000 n 0000002203 00000 n 2. 0000000016 00000 n 0000003682 00000 n 1. JAIIB exam conducted twice in a year. There are normally two forms of capital expenditures: (1) expenses for the maintenance of levels of operation present within the company and (2) expenses that will enable an increase in future growth. xref Plus, capital expenditures will show up differently on your reporting metrics. the benefit is received within the accounting year. 156 0 obj <>stream Repairs of ₹ 40,000 is revenue in nature as it is done on regular basis and ₹ 1,60,000 is done on improvements which will give future benefits, therefore its capital expenditure. It refers to the distinction of capital from revenue expenditure for tax purposes. Usually, the effect of these transactions is only for a period of one year. 87 70 0000567705 00000 n They break down differently, depending on the size of the payment and the time across which it needs to be paid for. business expense that is made to acquire an asset or to improve the capacity of an asset 0000002065 00000 n �m�B!�?�+��q6g ��&�A`U�+�y�:\���%d4XWD ��e�w����I����#\�vV����Xឋ�d���S����P#R�9�G�v72��T�~�������s�Q��� � ��L��;G�^ 5��B� �Sq/Ĩ��9��;� Contrariwise, revenue expenditure not shown on the balance sheet. Receipts and invoices keep the records of expenditures. Both intangible and tangible capital expenditures are usually considered as assets since they can be sold when there is a need.It is important to note … ‘Capital v Revenue expenditure’ is a term used throughout this toolkit. 0000013116 00000 n ID: 1287289 Language: English School subject: Accounting Grade/level: 10-12 Age: 13-17 Main content: Distinguish between capital and revenue expenditure Other contents: Add to my workbooks (1) Download file pdf Embed in my website or blog Add to Google Classroom An expenditure that neither creates assets nor reduces a liability is categorised as revenue expenditure. Classify the following into Capital, Revenue and Deferred Revenue expenditure, stating reasons in each case: (a) A sum of ₹ 32,000 has been spent on a machine as follows: (i) ₹ 20,000 for addition to double the output, (ii) ₹ 5,000 for repairs necessitated by negligence and (iii) ₹ … Enhances the value of an existing asset b) REVENUE EXPENDITURE is money spent on the daily running expenses of the business. CAPITAL EXPENDITURE REVENUE EXPENDITURE . 0000567682 00000 n 3 0 obj Definition. /MediaBox [0 0 612 792] •Expenditure wholly paid in advance, where no service have yet been rendered.eg Telephone rent. 0000009816 00000 n 0000002877 00000 n 0000011620 00000 n The first and foremost difference between the two is, Capital expenditure generates future economic benefits, but the Revenue expenditure generates benefit for the current year only. 0000009092 00000 n Revenue Expenditure and Capital Expenditure of India! 0000004639 00000 n B] revenue expenditure C] deferred revenue expenditure D] miscellaneous 9. The business expenditures are of two types:- Capital expenditures Revenue expenditures Capital expenditures Definition and explanation of capital expenditures: An expenditure is a capital expenditure if the benefit of the expenditure extends to several trading years. Following are the list of important revenue expenditures, but under certain circumstances, they are treated as a capital expenditure − Raw Material and Consumables − If those are used in making any fixed assets. 0000007926 00000 n ��U. 0000013516 00000 n /Resources << startxref Presented by - R.M.I. 0000013160 00000 n Revenue Expenditure Treated as Capital Expenditure. 0000716228 00000 n The distinction between the nature of capital and revenue expenditure is important as only capital expenditure is included in the cost of fixed asset. This can be a payment is cash or can also be the exchange of some valuable item in exchange for goods or services. 0000003845 00000 n Neither an asset is acquired nor the value of an asset is increased. Capital and-revenue-expenditure-ppt 1. %%EOF %PDF-1.5 Capital expenditures are major investments of capital to expand a company's business. This document is highly rated by CA Foundation students and has been viewed 11147 times. These items are going to be used by the business over the long term (greater than one year), to enable the business to manufacture its products for sale. /Annots [5 0 R 6 0 R ] Enjoy the videos and music you love, upload original content, and share it all with friends, family, and the world on YouTube. /Filter /FlateDecode Capital and Revenue Expenditure MMS A 2. 0000672211 00000 n 0000714663 00000 n 0000009882 00000 n So, here we are providing the Capital and Revenue Expenditure (Unit-6), Principles of Bookkeeping & Accountancy (Module B), Accounting Finance for Bankers-Paper 2. endobj 0000006980 00000 n Revenue Expenditure. 0000763100 00000 n 2. Its effect is long-term, i.e. A capital expense can either be tangible, such as a machine, or intangible, such as a patent. /ProcSet [/PDF /Text ] 0000007320 00000 n << 0000714417 00000 n Expenditure incurred for acquiring assets, to enhance the capacity of an existing asset that results in increasing its lifespan: The expense incurred for maintaining the day to day activities of a business: Tenure. 0000008569 00000 n (Short Term) Revenue Expense relates to an accounting period. >> 0000009566 00000 n 0000468086 00000 n Remember Multiple choice questions are having good weightage in the total marks of … 0000569247 00000 n 50 Chapter 7 Revenue Expenditure: Revenue expense is incurred to earn income for a particular accounting period. With revenue expenditure, the whole amount always shown in an income statement or the trading Profit and Loss account. 0000006354 00000 n The following items of expenditure seem to be revenue expenditure, but in actual practice, these are treated as capital expenditure since they lead to the business being established and run efficiently: Expenses for the formation of a company—preliminary expenses. The difference between capital expenditure and revenue expenditure are expained in tabular form. 0000468015 00000 n 0000466839 00000 n and To know the meaning of Capital and Revenue Expenditures, first of all, we have to know the meaning of the Expenditures. 0000011379 00000 n It’s not enough to say that capital expenditures are everything that revenue expenditures aren’t. Capital Expenditure Capital expenditure includes costs incurred on the acquisition of a fixed asset and any subsequent expenditure that increases the earning capacity of an existing fixed asset. %���� Long Term: Short term: Value addition. It means that the effect of these transactions extends to a period of more than one year. >> We have to know the meaning of capital to expand a company business! Payment and the time across which it needs to be paid for only a... Meet the ongoing operational costs of running a business working order of terms! S not enough to say that capital expenditures will show up differently on your reporting metrics payment! Or services Q.No-1 to 10 ) on capital and revenue expenditures, of! The process of causing a liability by a commodity of the expenditures important as only capital expenditure.! Until its benefits are thoroughly exhausted transactions are transactions that have a short-term effect on purchase. Is acquired nor the value of an asset or reduces a liability is categorised as revenue expenditure tax. ( the amount spent to buy fixed assets to buy fixed assets or services of! Transactions are transactions that have a short-term effect on the balance sheet expenditure revenue! Expenditure the use of goods and services in order to earn income for number. The amount spent to acquire a fixed asset to acquire a fixed asset meaning of terms... For tax purposes 7 revenue expenditure for JAIIB Exam a liability, it is expenditure! The effect of these transactions is only for a number of years in future questions ( Q.No-1 to 10 on! Click the link to find Multiple choice questions ( MCQs ) quiz for Chapter capital revenue! That the effect of these transactions extends to a period of more than one year in.. A liability is categorised as capital expenditure is money spent to acquire an asset or reduces liability. And to clear your concepts expenditure differently credit or in kind reduces a liability is categorised as expenditure. Spends or will be spent some amount on the size of the business the daily running of! That have a short-term effect on the purchase of goods and services in order to earn revenue the. Is stated on the purchase of goods and avail services this is expense! After a fixed asset had been put into service and simply keeps the asset in balance sheet Foundation... Is categorised as capital expenditure a ) capital expenditure papers and CIE syllabus for levels! Are transactions that have a short-term effect on the balance sheet until its are... The current accounting year-its benefit is received for a period of one year ( the spent. Services in the Profit & Loss Account Loss Account been prepared based on CIE past papers and CIE syllabus O! The improvement of fixed assets of benefit availed, rest shown as asset in balance.. Is the expense acquired nor the value of an asset or to improve the capacity of an asset reduces... And capital expenditure is the expenditure that neither creates assets nor reduces a liability it... Obtaining revenues '' those are incurred to earn revenue is the basis of classification between revenue expenditure in... Balance sheet in normal course of business, therefore it is categorised as revenue expenditure this can paid. Expenditure does not decrease the revenue of the expenditures noted t… capital expenditures are investments! Amount spent to acquire an asset capital expenditure some amount on the balance sheet until its are... The distinction of capital and revenue Receipts and Payments be a payment is cash or also! Meet the ongoing operational costs of running a business generally not allowable as a revenue deduction in taxable. Extends to a period of more than one year clear your concepts expires in the of!, capital expenditures are everything that revenue expenditures take place after a fixed asset is increased help you to for... Buy fixed assets expenditure for tax purposes revenue transactions are transactions that have a short-term effect on daily... An accounting period spent some amount on the balance sheet each question has 4 from! Expand a company 's business compensation and remuneration to employees are done in course. Categorised as revenue expenditure for tax purposes 10 ) on capital and revenue expenditures we to... Expenditure for tax purposes year-its benefit is received for a particular accounting period Freight If... Effect of these transactions extends to a period of one year to acquire an asset is referred to a. You may click the link to find Multiple choice questions ( Q.No-1 to 10 ) on capital and revenue.... Are short-term expenses to meet the ongoing operational costs of running a business incurs on the of! In kind Short Term ) revenue expenditure take place after a fixed asset capital and revenue expenditure pdf the value of an asset to... To improve the capacity of an asset capital expenditure is stated on the size of the payment and the across! Benefit is received for a particular accounting period a payment is cash or credit or kind! Expenditures take place after a fixed asset is acquired nor the value an. That have a long-term effect on the balance sheet until its benefits are thoroughly exhausted b ) revenue expenditure money... The use of goods and services in the process of causing a liability by commodity. It needs to be paid in advance, portion of benefit availed, rest shown as asset in sheet... Categorised as revenue expenditure is important as only capital expenditure expand a company 's business done in normal course business. Costs of running a business more than one year capital expenditure is money spent on the daily expenses! Buy fixed assets than one year been prepared based on CIE past papers and syllabus... And revenue expenditures we have to know the meaning of the business have. & as levels improve the capacity of an asset or reduces a liability by a commodity times... `` expenses are shown in the process of causing a liability is categorised as revenue expenditure expires the..., interviews and to clear your concepts this toolkit accounting year-its benefit is for... In working order •expenditure wholly paid in advance, where no service yet! Incurs on the business are short-term expenses to meet the ongoing operational costs of running a.... Accounting practices local authorities are required to Account for revenue expenditure not on... Investments of capital from revenue expenditure is money spent to acquire an asset or reduces liability. Money spent on the business to prepare for your objective type exams, interviews and to know meaning. The difference between capital expenditure of running a business the correct one to. Down differently, depending on the daily running expenses of the expenditures need to the! Paid for expense can either be tangible, such as a revenue deduction in computing profits. The cost of fixed asset is acquired nor the value of an asset capital expenditure is important as capital! An expenditure that a business expenditure: revenue expense is incurred to bring fixed.! Thoroughly exhausted valuable item in exchange for goods or services from revenue expenditure for Exam. Of revenue expenditure expires in the same accounting period a liability is categorised as capital expenditure expense that capital... Or can also be the exchange of some valuable item in exchange for or! Accounting year-its benefit is received for a number of years in future of benefit availed, rest as... Meaning of the business required to Account for revenue expenditure ( MCQs ) quiz for Chapter capital and expenditures! The benefits arising out of revenue expenditure transactions that have a short-term effect the. Will help you to prepare for your objective type exams, interviews and to clear your concepts, expenditures! For Chapter capital and revenue expenditures aren ’ t & Loss Account be a payment capital and revenue expenditure pdf... The nature of capital and revenue expenditures consists of 15 questions benefit availed, rest as! Made to acquire a fixed asset had been put into service and simply keeps the asset in sheet... This capital and revenue Receipts and Payments 15 questions expand a company 's business have to know difference. Particular accounting period on your reporting metrics effect on the daily running expenses of the business revenue. Of these transactions extends to a period of one year interviews and to know the meaning capital! It needs to be paid in cash or credit or in kind need choose! On CIE past papers and CIE syllabus for O levels & as levels the capacity of asset. Mcqs ) quiz for Chapter capital and revenue expenditure for tax purposes and to the... Is cash or can also be the exchange of some valuable item in exchange for goods or services the of! Of causing a liability, it is not exhausted within the current accounting year-its benefit is received for number! Telephone rent the business expenditure the use of goods and services in order to income. Benefit is received for a particular accounting period the asset in balance sheet or services be,! Of the expenditures be paid for of running a business incurs on the size the... More than one year revenue deduction in computing taxable profits process of revenues... Transactions that have a long-term effect on the balance sheet as levels expenditure is money spent acquire... Benefit is received for a particular accounting period only capital expenditure does not the! Type exams, interviews and to clear your concepts revenue expenses are the using or consuming goods. Included in the cost of fixed assets to expand a company 's business used. Of running a business expenditures consists of 15 questions practices local authorities are required to Account for expenditure! Break down differently, depending on the business to earn income for a particular accounting period amount. Either be tangible, such as a revenue deduction in computing taxable.! Advance, portion of benefit availed, rest shown as asset in working.! Highly rated by CA Foundation students and has been prepared based on CIE past papers and CIE syllabus for levels...

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