CAPITAL EXPENDITURE
REVENUE EXPENDITURE
1. Nature of Assets purchased
Any expenditure incurred to acquire a fixed asset or in connection with installation (expenses for installation) of fixed asset is capital expenditure.
Any expenditure incurred as price of goods purchased for resale along with other necessary expenses incurred in connection with such purchase are revenue expenses.
2. Discharging Liability
A payment made by a person to discharge a capital liability is a capital expenditure
An expenditure incurred to discharge a revenue liability is revenue expenditure
3. Based on Transactions
If expenditure is incurred to acquire a source of income, it is capital expenditure e.g., purchase of patents to produce picture tubes of TV set.
An expenditure incurred to earn an income is revenue expenditure. E.g. salary, advertisement etc. Continue reading ‘CAPITAL EXPENSES VS. REVENUE EXPENSES’ »