Capital and Revenue Expenditure

Question 1

What is the definition of Capital Expenditure

Answer 1

Capital Expenditure is items that will benefit the firm beyond the current year and creates an asset. These are recorded in the statement of financial position.

Question 2

What are the three types of Capital Expenditure

Answer 2

The three types of capital expenditure are:

• Purchase of a fixed asset
• Costs spent to install the fixed asset to get it ready for use
• Improvements to the fixed asset to extend its useful life.

Question 3

What is the definition of Revenue Expenditure

Answer 3

Revenue expenditure is items that will benefit the firm for the current year and are classified as an expense. These are recurring costs incurred to acquire revenue and affect the calculations in the profit/loss for the year ended. These are recorded in the income statement.