FRF7
Syllabus B. ACCOUNTING FOR TRANSACTIONS IN FINANCIAL STATEMENTS B1. Tangible non-current assets

B1b. Capital and revenue items 3 / 7

Syllabus B1b)

Identify subsequent expenditure that may be capitalised, distinguishing between asset and expense items

ACCA FA D4c Capital and revenue items graph
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; 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.