Capital and revenue expenditure

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Capital and revenue expenditure

Capital expenditure

can be defined as expenditure on productive assets e.g. non-current assets such as buildings, lifts, heating, machinery, vehicles, and office equipment. 

This can be for expansion and/or to improve quality for profitability purposes.

Capital expenditure appears as a non-current asset in the statement of financial position.  

Depreciation is charged in the income statement as an expense.

All the costs incurred in self constructed assets (a business builds its own non-current asset) should be included as a non-current asset in the statement of financial position.

Revenue Expenditure

This expenditure is on day to day items, i.e. where the benefit is received short term.  

This includes salaries, telephone costs or rent.  

It is incurred for the purpose of trade, i.e. for expenditure classified as selling and distribution expenses, administration expenses and fixed charges or to maintain the existing earning capacity of non-current assets.

Revenue expenditure is included as an expense in the period in which it is incurred

Capital Income

Capital income is the proceeds from the sale of non-current assets and non-current asset investments

Revenue Income

Revenue income is derived from the sale of trading assets and from interest and dividends received from investments held by the business.

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