Capital and Revenue Expenditure

Question 1

Define capital expenditure

Answer 1

Items that will benefit the firm beyond the current year and creates an asset. These are recorded in the balance sheet.

Question 2

What are the three types of capital expenditure?

Answer 2

Purchase of a fixed asset, costs spent to install the fixed asset to get it ready for use, improvements to the fixed asset toe extend its useful life.

Question 3

Define revenue expenditure

Answer 3

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 affect the current year’s profit/loss for the year calculation. These are recorded in the income statement.