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Basic Terms in Accounting - Expenditure and Its Types

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  • Definition: Expenditure
  • Types of Expenditure
  • Real-Life Examples
Maharashtra State Board: Class 11

Definition: Expenditure

Expenditure is the money a business spends to receive something in return, like goods, services, or assets. 

Maharashtra State Board: Class 11

Types of Expenditure

Feature Capital Expenditure Revenue Expenditure Deferred Revenue Expenditure
Meaning Money spent to acquire or improve long-term assets Money spent on daily operations/running costs Large revenue-like expense; benefit lasts over several years
Benefit Period Long-term (more than one year) Short-term (within one year) 2–3 years, but not permanent
Accounting Effect Added to concerned asset in Balance Sheet Fully charged to Trading/Profit & Loss Account Partly written off to Profit & Loss Account; the balance is shown as asset
Nature Non-recurring(occasional), increases value of assets Recurring (regular) keeps business running Non-recurring, still revenue 
  • It is related to day-to-day expenses
  • It does not create/improve an asset
  • Its cost is spread out over the benefit period but not capitalized (added to asset) like capital expenditure
Purpose Increases earning capacity or lifespan of asset Maintains earning capacity for the period Boosts business with benefit spread over future periods
Appearance in Books Shown as Asset in Balance Sheet Shown as Expense in Trading/Profit & Loss Account Shown partly in both: Profit & Loss Account and Balance Sheet
Maharashtra State Board: Class 11

Real-Life Examples

Type of Expenditure Real-life Example (In Case of a Bakery)
Capital Expenditure Buying a delivery van 
Revenue Expenditure Paying monthly electricity bill
Deferred Revenue Expenditure Spending a large sum on a two-year advertising campaign 
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