capital and revenue expenditure pdf

December 30, 2020 in Uncategorized

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

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