Capital & Revenue Expenditure

Question 1

Define revenue expenditure

Answer 1

All expenses incurred in order to run the business smoothly on a daily basis, for example fuel, stationery and coffee

Question 2

Define capital expenditure

Answer 2

When the business purchases an asset or adds to the value of an existing asset, for example carriage inwards, installation costs or legal costs

Question 3

What will happen if one expenditure is mistaken for the other?

Answer 3

The gross and net profit figures will be incorrectly stated, as will the Balance Sheet figures

Question 4

Can an item be capital and revenue? If yes, explain.

Answer 4

Yes (nou moet jy wragtag verduidelik)

An example of this would be doing upgrades and repairs to a building. Upgrades are capital where repairs are revenue

Question 5

What are revenue receipts?

Answer 5

Sales and other income

Question 6

What are capital receipts?

Answer 6

Money received when a fixed asset is sold