Difference Between Capital Expenditure And Revenue Expenditure

A capital expenditure is money spent to buy fixed assets.

Difference between capital expenditure and revenue expenditure. Some of these expenditures are meant to bring in more profits for the organisation in the long term while some expenditures are for the short term. B revenue expenditure is money spent on the daily running expenses of the business. Capital expenditure revenue expenditure. Capital expenditure is divided into these 3 distinct groups expenses that a firm incurs to lower cost.

Types of capital expenditure. Purchase a building rent a building. The main difference between capital expenditure and revenue expenditure is that capital expenditure is assumed to consume over the useful life of the related fixed asset whereas revenue expenditure is assumed to consumed within a very short period. The most significant difference between revenue and capital expenditure is that the capital expenditure is meant to improve the general earning.

Capital expenditures are for fixed assets which are expected to be productive assets for a long period of time. Compensation paid to the director of a company for the loss of his office is a revenue expenditure because the company will get the benefit of this expenditure only for one year. Differences between capital expenditure and revenue expenditure. It must be noted here that capital expenditure is capitalised.

Revenue expenditures are matched against revenues each month it is not reflected on the balance sheet the way a capital expenditure is. They re listed on the income statement to calculate the net profit of any accounting period. Revenue expenditures are for costs that are related to specific revenue transactions or operating periods such as the cost of goods sold or repairs and maintenance expense thus the differences between these two types of expenditures are as follows. Difference between capital expenditure and revenue expenditure a business organisation incurs expenditures for various purposes during its existence.

The first and foremost difference between the two is capital expenditure generates future economic benefits but the revenue expenditure generates benefit for the current year only. Further depreciation is charged on capex every year and is among the prominent differences between capital expenditure and revenue expenditure. Capacity of business and revenue expenditure is aimed at maintaining that earning capacity. Capital versus revenue expenditure.

The difference between capital expenditure and revenue expenditure are expained in tabular form.