Capital & Revenue expenditure

A capital expenditure is an amount spent to acquire or improve a long-term asset (not intended to be held for sale in the ordinary course of business) such as equipment or buildings. In other words, future benefits are also derived from such expenditure. 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.  In other words, no future benefit is derived from such expenditure. 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.

Originally posted by : lokesh maheshwari
	according to schedule VI and AS-6 assets less than Rs 5000/- should be debited to p&l Account so if the expenditure is less than 5000 it will be treated as a revenue expenditure

 Agreed

ya main thing here would be materiallity ....

As a data card is not very costly you can take it under revenue expenditure.

But i have seen in some places they will capitalise it as fixed asset and write it off completely in that year. I think that would be a better option so you will be knowing what are the assets in your business when you look at the detailed fixed assets schedule. As the data card is new you might want to have some control over it.

Originally posted by : lokesh maheshwari
	according to schedule VI and AS-6 assets less than Rs 5000/- should be debited to p&l Account so if the expenditure is less than 5000 it will be treated as a revenue expenditure

Agreed with thanks. 

it should be charged to revenue

reasoning-because modem after you terminate the coneection is of no use....and if u change the ISP(Internet service provider) even the each ISP has the policy of installing their own modem....so old modem is of no use....

hence it is a company it may installed various modems or big modem on server computer it may cost the company more than 5000....even though this charged to p/l. 

to capitailse 2 condintions..1) it shud be come with in the defination of capital asset

                                                  2) it shud be more thn 5000....

this exp you r refffering doesnot satisfy the 1st condition ....so 2nd is irrelevant...

pls write if u have ny doubt 

I agree ''connection charges and modem charges should be capitalised and recharge or usage charges should be charged to revenue'' but amount also matters. If cost is insignificant it can be charged to revenue.

Revenue Expenditure

REVENUE EXPENDITURE

Here the Concept of Materiality comes to play.

As in a company it expenditure like a broadband connection does not effect the decisions of share holders

so as per my view it is not material and AS-10 suggests that any expenditure done to improve the performance of the asset beyond standards it is capital exp. but it also suggests the exp. should be material.

SO IT IS A Revenue EXp.

it is REVENUE expenditure, its like telephone expenditure... agree with all