21 February 2014
As I Know 'capital expenditure' means expenditure which will give benefits over a no. of Accounting Periods.Its means expd. incurred to acquire fixed assets or its improvement.
'Revenue expenditure' means amt. spent to purchase goods and services that are consumed during the Accounting Period. Its does not increase earning capacity but maintains the earning capacity.
Now pls tell me 1. Tyre of car purchased of Rs.25000/- will be considered CAPEX or REVENUE EXP.
2. Internal new Hard Disk OF PC And new RAM of PC is purchased worth ₹7000/- will be considered CAPEX or REVENUE EXP.
Pls Also TEll ME Whether Materiality OF Items Purchased should also be kept in mind
21 February 2014
Tyre purchased for a car will be revenue expenditure. Internal Hard Disk and a new Ram purchased for PC will also be revenue expenditure. Materiality of Items purchased should always be kept in mind while capitalizing a item. For example if you purchase a low end software you should charge it to revenue but if you purchase high value software like erp it should be capitalized.
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