Capital and Revenue (expenditure n receipt)

Question 1

What is capital expenditure

Answer 1

-Expenditure on acquisition of non-current assets.
-Expenditure on an improvement in NCA earning capacity.

Question 2

Examples of capital expenditure

Answer 2

-Purchase of non-current assets
-Extension made on assets
-Other costs to get non-current assets operational

Question 3

Other costs to get non-current assets operational

Answer 3

-Delivery cost
-Installation cost
-Inspection n testing NCA before use
-Legal costs in purchasing property/land
-Architect’s fees for building plans n for supervising
-Construction of building
-Demolition costs to remove something before new building can begin

Question 4

What is revenue expenditure

Answer 4

-Incurred for the purpose of the trade of the business (e.g for daily operations)
-Incurred to maintain the existing earning capacity of NCA

Question 5

Characteristics of rev exp

Answer 5

• lasts less than ONE year
• charged to SOPL of a period

Question 6

Examples of rev exp

Answer 6

-Rent
-Heat
-Light
-Postage
-Carriage outwards
-Motor Repairs

Question 7

What is capital receipts

Answer 7

Income derived from transactions that are not the usual activities of the business
(not included in SOPL)
** the funds that a company, organization, or government receives from capital-related sources, such as the sale of assets, borrowing, or equity investments

Question 8

Examples of cap receipts

Answer 8

-Proceeds from the sale of NCA (**only profits or losses from sale of NCA are in SOPL)
-Loan taken

Question 9

What is Revenue receipts

Answer 9

-Income derived from the ‘usual’ activities of the business
-the sale of trading assets
-interest n dividends received frm investments held by the business
(included in SOPL)

Question 10

Examples of rev receipts

Answer 10

-Sales
-Interest received
-Discount received