CIMA F1 Syllabus B. Financial Statements - Capital and revenue items - Notes 5 / 7
| Nature of transaction | Meaning |
| Capital expenditure | i.it increases the value of non-current assets ii.it improves the earning capacity of an asset iii.e.g. purchase of computers, vehicles, building, land, plant and machinery; stamp duty, registration fees, solicitor’s fees, architect’s fees, installation charges and transportation costs; fitting of air conditioner in vehicles |
| Revenue expenditure | i.it is incurred to maintain existing capacity of asset ii.regular expenditure iii. e.g. repairs and maintenance to machinery, electricity cost for machinery, spare parts for machinery |
| Capital receipt | i.it is income which is not earned out of the regular operations of an entity, i.e. not realized by the sale of the merchandise of the entity ii.it is a receipt earned when an item of capital expenditure is sold iii. it decreases the value of non-current assets |
| Revenue receipt | i.it is a regular receipt/income ii.it decreases current assets iii. it is a result of the sale of the entity’s merchandise and other revenue items such as rent received or commission received |
Capital expenditure results in the appearance of a non-current asset in the statement of financial position of the business.
Revenue expenditure results in an expense in the statement of profit or loss.