Question

10. From the following information given, classify each as CAPITAL EXPENDITURE (C) and REVENUE EXPENDITURE (R) (Marks Allotted: 2) a. Purchase of Office Equipment (Your answer, here) b. Postage & Printing Charges (Your answer, here) C. Payment of Office Rent (Your answer, here) d. Purchase of Delivery Van (Your answer, here) ii. Discuss, at least, one difference between CAPITAL EXPENDITURE and REVENUE EXPENDITURE. (Marks Allotted: 2) Your Answer: END OF QUESTION PAPER

Answer 1

10- i.) a. b. c. d Purchase of office equipment Capital expenditure (C) Postage & printing charges Revenue expenditure ('R) Payment of office rent Revenue expenditure ('R) Purchase of delivery van Capital expenditure (C) 10- ii.) Capital expenditure: Capital expenditure includes costs incurred on the acquisition of a fixed asset and any subsequent expenditure that increases the earning capacity of an existing fixed asset. Revenue expenditure: Revenue expenditure incurred on fixed assets include costs that are maintaining, rather than increasing the earning capacity of the assets. Difference: Capital expenditure is a long-term expenditure. It is not exhausted within a current accounting year. Capital expenditure is an item of balance sheet. Revenue expenditure is a short-term expenditure. Its benefits are received within the current accounting year. Revenue expenditure is an item of profit and loss account.