Capital and Revenue Expenditure Flashcards
1
Q
What is the definition of Capital Expenditure?
A
Capital expenditure is items that will benefit the firm beyond the current year and creates an asset. These are recorded in the Balance Sheet.
2
Q
What are the 3 types of Capital Expenditure?
A
- 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
3
Q
What is the definition of Revenue Expenditure?
A
Revenue expenditure is items that will benefit the firm for the current year and are classified as expenses. They are recurring costs incurred to earn revenue and will effect the current year’s profit/loss for the year calculation. These are recorded in the Income Statement.
