Differentiate between Revenue Expenditures and Capital Expenditures ?

the diffrence betwheen revenue expendeture the capital expendeture is so simple, the some amount which you have spend to build up your complete setup is called your capital expendeture. all expendeture from a to z should be calculated there but the expendeture which are used to collect the revenue or to inhance the profet morgen are called revenue expendeture.

Capital expense is spent to increase energy productivity, and contribute to the achievement of revenue for more than a financial period

 For example: Purchase of fixed assets, purchase of spare parts to increase production capacity.

The shows for this expense at the end of the financial period the balance in the budget.

The revenue   expense is spent to conduct the business of established regular and contribute to your revenue in the same period and maintain the level of efficiency of productive assets,

for example:

maintenance, wages, salaries. And close this expense at the end of the financial period in the final accounts.

And are relying on the following criteria to distinguish between capital and revenue expense :

1- standard schedule: If they take advantage of the expense for a period of more than a year is considered a capital expense, but if they take advantage confined in the year that is spent where revenue.

2- standard capacity: If the value of the expense increase in the value of the asset and its production capacity is capitalist, but if if the expense does not increase the production capacity is revenue exp.

3- standard value: If the amount of the expense is an expense few revenue exp even if it led to an increase in production capacity or has been used for a long time (according to the relative importance  principle )

Note: In some cases spend installations expenses revenue exp must be loaded on the cost of the same financial period, but the value is high (large) or the period that the benefit of established alimony exceed several financial periods

Example: the costs of research and exploration in the extractive industries, start-up costs, the costs of the campaign ad, and called on these expenditures expenses Revenue deferred, treated these expenses treatment of capital expenditure, which is divided alimony on the number of years to take advantage of them holds a portion of the financial period on the costs of the financial period, the rest of the expenses or resource deferred appears in the budget within the asset.

(see capitalization expenses) The importance of the distinction between capital expenditure or resource To determine the profit and loss and financial position accurately.

Regarded as the expense allowance capitalist Revenue leads to:

1-2-lowering profits reduce the value of assets

3 cut property rights Some companies have resorted to this method in the case of tax evasion

The consideration expense allowance revenue exp capitalist leads to:

1-2-increasing profits increase the value of the assets increase

3 property rights Some facilities may resort to this method if you want to borrow from banks Thread Moved to benefit

by simple explain PL or balance sheet accout

CAPITAL AND REVENUE EXPENDITURE:

1.   Cap: Its effect is long term i.e., it is not exhausted within the current account year. Its benefit is enjoyed in future year or years also. In a word, its effect is reduces gradually

        Rev: Its effect is temporary, i.e., it is exhausted within the current      accounting year.

2.   Cap: An asset is acquired or the value of an asset is increased as a result of this expenditure

    Rev: Neither an asset is acquired nor the value of an asset is     increased.

3. Cap: It does not occur again and again – it is non-recurring and         irregular.

    Rev: It occurs repeatedly – It is recurring and regular.

4.   Cap: Generally, it has physical existence i.e., it can be seen with eyes.

    Rev: It has no physical existence, i.e., it cannot be seen with eyes.

5.   Cap: This expenditure improves the position of the concern.

    Rev: This expenditure helps to maintain the concern

6.   Cap: A portion of this expenditure is shown in the trading and profit and loss account or income and expenditure account as depreciation.

    Rev: The whole amount of this expenditure is shown in trading and     profit and loss account or income and expense account. But      deferred revenue expenditures and prepaid expenses are not shown.

7.       Cap: It appears in balance sheet until its benefit is fully exhausted

    Rev: It does not appear in balance sheet. Deferred revenue      expenditure, outstanding expenditure, outstanding expenses and      prepaid expenses, however, temporarily.

8.       Cap: It does not reduce the revenue of the concern. Purchase of fixed assets does not effect revenue.

    Rev: It reduces revenue. Payment of salaries to employees       decreases revenue.

Capital expenditures are for fixed assets, which are expected to be productive assets for a long period of time. Revenue expenditures are for costs that are related to specific revenue transactions or operating periods, such as the cost of goods sold or repairs and maintenance expense.

Thus, the differences between these two types of expenditures are as follows:

• Timing. Capital expenditures are charged to expense gradually via depreciation, and over a long period of time. Revenue expenditures are charged to expense in the current period, or shortly thereafter.
• Consumption. A capital expenditure is assumed to be consumed over the useful life of the related fixed asset. A revenue expenditure is assumed to be consumed within a very short period of time.
• Size. A more questionable difference is that capital expenditures tend to involve larger monetary amounts than revenue expenditures. This is because an expenditure is only classified as a capital expenditure if it exceeds a certain threshold value; if not, it is automatically designated as a revenue expenditure. However, certain quite large expenditures can still be classified as revenue expenditures, as long they are directly associated with sale transactions or are period costs

I agree with Professor George

revenue exp are of the nature of routine expense and must be charge to the same year or period when they were incurred where as Capital exp are of capital nature and they have to amortize over a period of time based upon the nature or type of expense...