Regarding capitalisation

This query is : Resolved

Report Abuse Follow Query Ask a Query

Querist : Anonymous

Querist : Anonymous (Querist)

26 June 2012 sir,
i have purchased a laptop battery. it should be capitalise or revenue.

Sushil Kumar Shaokand

Sushil Kumar Shaokand (Expert)
Follow

26 June 2012 Revenue Expenses.
Diff b/w Cap Exp and Revenue Exp:
A capital expenditure is an amount spent to acquire or improve a long-term asset such as equipment or buildings. Usually the cost is recorded in an account classified as Property, Plant and Equipment. The cost (except for the cost of land) will then be charged to depreciation expense over the useful life of the asset.

A revenue expenditure is an amount that is expensed immediately—thereby being matched with revenues of the current accounting period. Routine repairs are revenue expenditures because they are charged directly to an account such as Repairs and Maintenance Expense. Even significant repairs that do not extend the life of the asset or do not improve the asset (the repairs merely return the asset back to its previous condition) are revenue expenditures.

Querist : Anonymous

Querist : Anonymous (Querist)

26 June 2012 sir,
can u more explain regarding my question....and if we purchase battery so it will increase laptop life.

Upgrade to CAclubindia Pro. Subscribe Now!

Sushil Kumar Shaokand

Sushil Kumar Shaokand (Expert)
Follow

27 June 2012 Dear Friend,
Actually there is not a definite list, but at the ground that, Purchasing Charger will not yield any additional Income, and it is purchased to maintain a fixed asset, we can say it a revenue income.

Conceptual definition of Capital and Revenue Expenditure can be brought from the following situation:

Capital Exp.
1. Pur of Fixed Asset
2. Asset is for use in business, and not for immediate resale.
3. It should have permanent benefit
4. It may be for the improvement of the existing asset in order to increase the earning capacity of the business.

Reveune Expenses:
1. Exp related to maintain the Fixed Asset
2. Normal day to day expenses etc.
3. Expenses made to maintain productivity and earning capacity of firm (not to increase earning capacity of Firm).

Querist : Anonymous

Querist : Anonymous (Querist)

27 June 2012 but it is increasing life of laptop. if laptop life will increase it will increase our earning. we can earn more than two years.