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Question -

Distinguish between capital and revenue expenditure and state whether the following statements are items of capital or revenue expenditure:
(a) Expenditure incurred on repairs and whitewashing at the time of purchase of an old building in order to make it usable.
(b) Expenditure incurred to provide one more exit in a cinema hall in compliance with a government order.
(c) Registration fees paid at the time of purchase of a building
(d) Expenditure incurred in the maintenance of a tea garden which will produce tea after four years.
(e) Depreciation charged on a plant.
(f) The expenditure incurred in erecting a platform on which a machine will be fixed.
(g) Advertising expenditure, the benefits of which will last for four years.



Answer -

Basis of Difference

Capital Expenditure

Revenue Expenditure

Meaning

It is incurred to increase the earning capacity of a business.

It is incurred to maintain the earning capacity of a business.

Purpose

It is incurred to acquire fixed assets to carry out operations.

It is incurred to conduct day to day activities.

Benefits

The benefits of such expenditures can be availed for more than one year.

The benefits of such expenditures can only be availed for one year.

Nature

It is┬аnon-recurring┬аby nature.

It is generally recurring in nature.

Shown

Capital expenditure is shown in the assets side of the Balance Sheet.

Revenue expenditure is shown in the debit side of the trading and Profit and Loss Account.
(a) Capital expenditure
(b) Revenue expenditure
(c) Capital expenditure
(d) Capital expenditure
(e) Revenue expenditure
(f) Capital expenditure
(g) Deferred revenue expenditure

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