28 October 2013
Expenditure which is not for increasing the value of fixed assets, but for running the business on a day to day basis, is known as revenue expenditure. Revenue expenditure is normally charged against profit in the Income statement in the year it is expensed.
Capital expenditure occurs when a business gets a long term advantage due to that expenditure.
It is usually incurred for accusation of an asset. These expenditures do not occur in the regular day to day transactions of the business.
Common examples
Purchase of furniture, office building etc. Purchase of additional furniture or machinery Expenditure incurred in connection with the purchase of a fixed asset. For example, carriage paid of machinery purchased. Purchase of patent right, copy rights etc.
Capital receipts
Capital receipts consist of additional payments made to the business either by owner or shareholder of the business; or
from sale of fixed assets of the business.
Revenue receipts
Any receipt in the normal running or through day to day transactions of the business is categorized as Revenue receipt.
Sales receipts of the business are revenue receipts.
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