capital and revenue items with meanings, examples and comparison

1. PRESENTATION ON
CAPITAL AND REVENUE ITEMS
Prepared by:
Sachita Nepal
Baishali Agrawal

2. Classification of expenditure
Capital expenditure
Revenue expenditure
Deferred revenue
expenditure

3. Capital expenditure
Expenditure incurred for long term advantage
Expenditure which results in the acquisition of
fixed assets
Includes other expenses in connection

4. Examples of capital expenditure
• Purchase of permanent tangible assets
- such as plant and machinery, office equipment,
furniture and so on
• All sums spent up to the point that an asset is
ready to use
- Include expense on its purchase, receipt ,etc
-Cartage paid to bring machinery,
- Installation charge
- Fees paid to lawyer for drawing land purchase deed

5. • Amount spent for the improvement of existing
asset
• Money paid for goodwill

6. Revenue expenditure
• Expenses whose benefit expires within a year
• Incurred to maintain the earning capacity of existing
asset
• Expenditure on consumable items, and services
• Expenses incurred during the regular course of
business

7. Revenge expenses generally includes:
• The cost of materials used in manufacturing
goods
• Wages paid in connection with the production
of goods
• Selling and distribution expenses

8. • All expenses incidental to the working of
business such as
deprciation,rent,salaries,interest,etc
• All expenses incurred for maintaining the
efficiency of fixed asset ,by means of repairs,
replacement and insurance

10. Deferred Expenditure
 A cost that has already been incurred, but
which has not yet been consumed.
 An expenditure which is revenue in nature
and incurred during an accounting period, but
its benefits are to be derived in multiple
future accounting periods.

11. Examples of deferred revenue
expenditure
• Heavy advertising expenses incurred in developing a
new market
• Cost of issuing shares and debentures
• Cost of experiments
• Discount on debentures
• Preliminary expenses

12. Capital loss
Any loss on account of the fixed capital assets is
capital loss.
A capital loss is a decrease in the value of
an investment.
 Capital loss is not incidental to business .
This can be set off against the income from capital
gains only.
For example: loss on sell of capital goods

13. Revenue loss
The loss on account of circulating capital
assets is a revenue loss.
Revenue loss is incidental to trade
These losses are business losses and as such
can be set off against any other income of the
assets.
For example: loss on sale of stock-in-trade

14. Difference between capital and
revenue loss
Capital loss
• It is shown either on assest
side or adjusted on capital
profit.
• It has non recurring nature.
• It results from capital items.
Revenue loss
• It is shown on debit side of
profit and loss account and
adjusted on retained
earnings in a liability side.
• It's nature is recurring
• It results from revenue
items.