Question

Write differences between:

Capital Expenditure and Revenue Expenditure

Answer 1

Basis	Capital Expenditure	Revenue Expenditure
1. Purpose	It is incurred for the acquisition of fixed assets to be used in the business.	It is incurred for day-to-day business conduct.
2. Earning capacity	Increases the business’s earning capacity.	Does not increase the earning capacity.
3. Period of benefit	More than one year.	Only to the current accounting year.
4. Accounting treatment	It is shown in the Balance Sheet.	It is shown in the Trading Account or Profit and Loss Account.