Capital & Revenue expendituRe 3. %���� (The amount spent to acquire a fixed asset is referred to as a capital expenditure. >> /Contents 4 0 R Revenue Expenditure Treated as Capital Expenditure. 0000003123 00000 n 0000003504 00000 n 0000763361 00000 n It’s not enough to say that capital expenditures are everything that revenue expenditures aren’t. Compensation and remuneration to employees are done in normal course of business, therefore it is revenue expenditure. 0000466839 00000 n Revenue transactions are transactions that have a short-term effect on the business. They break down differently, depending on the size of the payment and the time across which it needs to be paid for. 0000005661 00000 n Capital expenditure is the expenditure that a business incurs on the purchase, alteration or the improvement of fixed assets. Revenue Expenditure: Capital Expenditure: 1. This is the basis of classification between revenue expenditure and capital expenditure. CAPITAL EXPENDITURE REVENUE EXPENDITURE . 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� 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. Capital expenditure is defined in the Local Government 2003 Act as expenditure which, in accordance with proper accounting practices, falls to be capitalised. a) CAPITAL EXPENDITURE is money spent to buy fixed assets. 1. 0000005204 00000 n 50 Chapter 7 Revenue Expenditure: Revenue expense is incurred to earn income for a particular accounting period. Revenue Expenses are shown in the Profit & Loss Account. Revenue Expenditure. The difference between capital expenditure and revenue expenditure are expained in tabular form. This Multiple Choice Questions (MCQs) quiz for Chapter Capital and revenue expenditures consists of 15 questions. Hendriksen opines, "expenses are the using or consuming of goods and services in the process of obtaining revenues". /Type /Page Dec 24, 2020 - ICAI Notes 2.6, Capital & Revenue Expenditures & Receipts CA Foundation Notes | EduRev is made by best teachers of CA Foundation. xref startxref Long Term: Short term: Value addition. JAIIB exam conducted twice in a year. 0000003682 00000 n 0000714417 00000 n << 87 0 obj <> endobj 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. endobj 87 70 /F2 11 0 R 0000632664 00000 n 0000009136 00000 n The revenue expenditures take place after a fixed asset had been put into service and simply keeps the asset in working order. Receipts and invoices keep the records of expenditures. >> /F3 14 0 R %PDF-1.5 This document is highly rated by CA Foundation students and has been viewed 11147 times. 0000468086 00000 n 0000468015 00000 n 0000011532 00000 n Contrariwise, revenue expenditure not shown on the balance sheet. Expenditure that is capital is generally not allowable as a revenue deduction in computing taxable profits. 0000008569 00000 n 0000634499 00000 n 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… You may click the link to find Multiple choice questions (Q.No-1 to 10) on Capital and Revenue Receipts and Payments.. As we all know that is Capital and Revenue Expenditure for JAIIB Exam. 156 0 obj <>stream This worksheet has been prepared based on CIE past papers and CIE syllabus for O levels & AS levels. 0000470070 00000 n 0000567682 00000 n 1. /Font << The distinction between the nature of capital and revenue expenditure is important as only capital expenditure is included in the cost of fixed asset. Neither an asset is acquired nor the value of an asset is increased. 0000468051 00000 n The following Capital and Revenue expenditure worksheet-1 covers all the aspects of Capital and Revenue Expenditure and Receipts. 4 0 obj Capital expenditures vs. revenue expenditures. Capital transactions are transactions that have a long-term effect on the business. Practice following Capital and Revenue Expenditure Multiple choice questions. 0000012552 00000 n 0000468528 00000 n It should be noted t… Definitions . Enjoy the videos and music you love, upload original content, and share it all with friends, family, and the world on YouTube. Presented by - R.M.I. 0000672545 00000 n For example, the purchase of furniture for offic… ��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�(���. Usually, the effect of these transactions is only for a period of one year. A capital expense can either be tangible, such as a machine, or intangible, such as a patent. 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. 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. 0000013516 00000 n 0000762829 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��;� 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 … <<287C8A0D27573243BEB1C72F64F697F1>]>> 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. 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. 0000009816 00000 n trailer Plus, capital expenditures will show up differently on your reporting metrics. REVENUE EXPENDITURE •Class of revenue expenditure incurred during an accounting period, but applicable either wholly or in part to future period. Each question has 4 answers from which you need to choose the correct one. 2. 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. Enhances the value of an existing asset It means that the effect of these transactions extends to a period of more than one year. 0000012640 00000 n It is a capital expenditure. it is not exhausted within the current accounting year-its benefit is received for a number of years in future. 0000011585 00000 n 0000007926 00000 n Examples of differences between Capital and Revenue expenditure . and To know the meaning of Capital and Revenue Expenditures, first of all, we have to know the meaning of the Expenditures. An expenditure that neither creates assets nor reduces a liability is categorised as revenue expenditure. /Length 2478 To know the Difference Between capital and revenue expenditures we have to know the meaning of both terms. It refers to the distinction of capital from revenue expenditure for tax purposes. 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. 0000006170 00000 n 0000012122 00000 n << 0000569247 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. 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���. the benefit is received within the accounting year. Capital and Revenue Expenditure MMS A 2. 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) ₹ … Its effect is long-term, i.e. 0000002751 00000 n 0000763100 00000 n Capital expenditures are major investments of capital to expand a company's business. 0000006354 00000 n /Annots [5 0 R 6 0 R ] 0000013160 00000 n 0000716228 00000 n Revenue Expenditure and Capital Expenditure of India! If it creates an asset or reduces a liability, it is categorised as capital expenditure. 0000466598 00000 n 0000674087 00000 n With revenue expenditure, the whole amount always shown in an income statement or the trading Profit and Loss account. Recurring or Regular expenditure. 0000524947 00000 n 0000004018 00000 n /ProcSet [/PDF /Text ] 0000002065 00000 n It is the process of causing a liability by a commodity. This Capital and revenue expenditures MCQs test will help you to prepare for your objective type exams, interviews and to clear your concepts. Under standard accounting practices local authorities are required to account for revenue expenditure and capital expenditure differently. 0000011406 00000 n Expenditure means spending on something. 0 business expense that is made to acquire an asset or to improve the capacity of an asset 0000006980 00000 n %%EOF 3 0 obj This can be a payment is cash or can also be the exchange of some valuable item in exchange for goods or services. >> 3 Expenditure The use of goods and services in order to earn revenue is the expense. So, here we are providing the Capital and Revenue Expenditure (Unit-6), Principles of Bookkeeping & Accountancy (Module B), Accounting Finance for Bankers-Paper 2. /MediaBox [0 0 612 792] 0000632957 00000 n 0000567705 00000 n 0000002968 00000 n 0000524682 00000 n Capital expenditure does not decrease the revenue of the business. Cartage and Freight − If those are incurred to bring Fixed Assets. Capital Expenditure. 0000672211 00000 n 0000013116 00000 n These can be paid in cash or credit or in kind. >> Remember Multiple choice questions are having good weightage in the total marks of … 0000002203 00000 n 0000714686 00000 n 0000009882 00000 n 0000000016 00000 n 0000004639 00000 n 0000632404 00000 n 0000002877 00000 n ��U. Capital versus Revenue expenditure . 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 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. ‘Capital v Revenue expenditure’ is a term used throughout this toolkit. Therefore we can conclude that it is the time factor, which is the main determinant for transferring the expenditure to profit and loss account. 0000714663 00000 n Purchase a building Rent a building b) REVENUE EXPENDITURE is money spent on the daily running expenses of the business. Expenditures meaning spends or will be spent some amount on the purchase of goods and avail services. 0000007139 00000 n 0000011379 00000 n /Filter /FlateDecode /F1 8 0 R 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. 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. 2. 0000001730 00000 n 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. B] revenue expenditure C] deferred revenue expenditure D] miscellaneous 9. 0000012605 00000 n 0000007320 00000 n 0000567431 00000 n •Expenditure wholly paid in advance, where no service have yet been rendered.eg Telephone rent. Definition. •Partly paid in advance, portion of benefit availed ,rest shown as asset in balance sheet. 0000526760 00000 n 0000009092 00000 n @n� #�I�ٴ58�f[! %PDF-1.6 %���� The benefits arising out of revenue expenditure expires in the same accounting period. stream (Short Term) Revenue Expense relates to an accounting period. Capital expenditure is stated on the balance sheet until its benefits are thoroughly exhausted. 0000009566 00000 n 0000763412 00000 n 0000011620 00000 n 0000672486 00000 n 0000003845 00000 n Capital and-revenue-expenditure-ppt 1. 3) Recorded in balance sheet Recording in Manufacturing, Trading or Profit and Loss A/c 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. Revenue expenses are short-term expenses to meet the ongoing operational costs of running a business. Capital and revenue expenditures are two different types of business expenditures that we often find in financial accounting and reporting. 0000525218 00000 n /Resources << Its effect is temporary, i.e. /Parent 2 0 R Objective type exams, interviews and to clear your concepts `` expenses are short-term expenses to meet the operational. 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