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. Those are recorded in the Balance Sheet.

Question 2

What are the 3 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 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 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