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Revenue Expenses -------Put in the income statement
Capital Expenses -------Put in the Balance Sheet directly or via Fixed assets schedule by taking into consideration the depreciation factor.
Expenditure on fixed assets may be classified into Capital Expenditure and Revenue Expenditure. The distinction between the nature of capital and revenue expenditure is important as only capital expenditure is included in the cost of fixed asset. -
capital expenditure is to be capitalized in statement of financial position while the revenue expenditure is charged to statment of profit and loss.. refer IAS 38 to see what criteria is required to met to capitalize the expense that is spent on development of intangible assets.
The treatment for both Capital and Revenue Expenditure are as follows:
Capital Expenditures are capitalized in the financial statements as Assets.
Revenue Expenditures are expensed as and when incurred.
Capital expenditures are capitalized and revenue expenditures are expense out.
well,
Capital expenditure : Are expenditure incurred to enhanced the earning capacity of the business , it has be a major cost.
Has to be capitalized in the statement of financial Position under Non-Current asset.
Revenue Expenditure: Are expenditure incurred to improve the current earning of the business, It has to be a minor cost . Like minor Repair & Maintenance cost
It is charge against profit in the statement of Comprehensive Income
The treatment of capital and revenue expenditure in the financial statements is defined as capital expenditures are investment in the company's fixed assets and revenue expenditures are expenses matched with the revenue during a specific period.
Expenses incurred by the company for the purpose of purchasing an asset are capital expenditures and are capitalised in the balance sheet.
Whereas, all the other expenses are of revenue nature and are charged to Statement of profit & Loss.
Capital expenditure is added to the relevant fixed assets and amortized as depreciation over the period of fixed asset.
Revenue expenditure will be expensed through profit and loss account during the current year
Capital expenditure includes costs incurred on the acquisition of a fixed asset and any subsequent expenditure which increases the earning capacity of the exisiting asset.
Capital expenditure includes:
It is recorded as Debit : Fixed Assets and Credit : Cash/ Payables
Rrevenue expenditure incurred on fixed assets include costs incurred for the maintenance of the assets instead of enhancing the earning capacity of the assets. These costs are incurred on a regular basis and the benefit of these costs is for a shorter period.
Revenue costs comprises of:
Revenue expenditure is expensed in the income statement in the period they are incurred and recorded as Debit: Revenue Expense and Credit: Cash/ Payables
