Distinguish Between Capital Expenditure And Revenue Expenditure

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

Distinguish between capital expenditure and revenue expenditure. The most significant difference between revenue and capital expenditure is that the capital expenditure is meant to improve the general earning. Capacity of business and revenue expenditure is aimed at maintaining that earning capacity. Differences between capital expenditure and revenue expenditure. The differences between capital expenditures and revenue expenditures include whether the purchases will be used over the long term or short term.

Capital expenditures capex are funds used by a. Difference between capital expenditure and revenue expenditure a business organisation incurs expenditures for various purposes during its existence. Capital expenditure or capex refers to the funds used by a business to acquire maintain and upgrade fixed assets. These might include plants property and equipment pp e like buildings machinery and office infrastructure.

Capital expenditures are for fixed assets which are expected to be productive assets for a long period of time. 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. A capital expenditure is an amount spent to acquire or significantly improve the capacity or capabilities of a long term asset such as equipment or buildings. 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.

This distinction between capital and revenue nature of the items is necessary in order to find out the correct profit or loss during the year and also to ascertain the true and fair position of the business. 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. What is a capital expenditure versus a revenue expenditure. The going concern assumption allows the accountant to classify the expenditure as capital expenditures and revenue expenditures capital receipts and capital revenues.

Definition of capital expenditure.