Revenue expenditure provides temporary benefits within the accounting year and does not result in acquisition of an asset. It is recurring and reduces profit. Capital expenditure provides long-term benefits over several years through acquisition or improvement of an asset. It is non-recurring and does not reduce profit. The document uses examples to distinguish between capital and revenue expenditures such as wages, transportation costs, repairs, and improvements to assets.
Capital expenditure & Revenue expenditureMudassir Raza
Capital expenditures are typically one-time large purchases of fixed assets that will be used for revenue generation over a longer period. Revenue expenditures are the ongoing operating expenses, which are short-term expenses used to run the daily business operations.
Marginal costing is a costing technique wherein the marginal cost, i.e. variable cost is charged to units of cost, while the fixed cost for the period is completely written off against the contribution.
Capital expenditure & Revenue expenditureMudassir Raza
Capital expenditures are typically one-time large purchases of fixed assets that will be used for revenue generation over a longer period. Revenue expenditures are the ongoing operating expenses, which are short-term expenses used to run the daily business operations.
Marginal costing is a costing technique wherein the marginal cost, i.e. variable cost is charged to units of cost, while the fixed cost for the period is completely written off against the contribution.
The owners or the management may desire to ascertain the trading results of each department and the overall result of the organization. The method of accounting which is followed to obtain such results is known as departmental accounting.
Fund flow statement is a statement that compares the two balance sheets by analyzing the sources of funds (debt and equity capital) and the application of funds (assets) and its reasons for any differences.
This is one of the hardest topic in Accounting. To make it easier I have prepared this one. It is according to AS 7. These are some of the basics of Contract Accounting. How to account Contact?
Like if it proves to be useful for you.
Presentation on Budget, Budgeting & Budgetary control
Contents:
1) Budgeting [characteristics]
2) Budgetary control
3) Difference in budget, budgeting, budgetary control
4) Essentials in budgetary control
5) Requisites for budgetary control system
6) Merits & limitations
7) Zero-based budgeting
8) Difference in Traditional & Zero based budgeting.
1.1 identify the type of accounting
1.2 difference between Cost Accounting , Cost Accountancy and Costing
1.3 understand the Management information needs
1.4 identify the objectives of cost accounting
1.5 difference between Cost Accounting Vs. Financial Accounting
1.6 identify the role of cost accountant
The owners or the management may desire to ascertain the trading results of each department and the overall result of the organization. The method of accounting which is followed to obtain such results is known as departmental accounting.
Fund flow statement is a statement that compares the two balance sheets by analyzing the sources of funds (debt and equity capital) and the application of funds (assets) and its reasons for any differences.
This is one of the hardest topic in Accounting. To make it easier I have prepared this one. It is according to AS 7. These are some of the basics of Contract Accounting. How to account Contact?
Like if it proves to be useful for you.
Presentation on Budget, Budgeting & Budgetary control
Contents:
1) Budgeting [characteristics]
2) Budgetary control
3) Difference in budget, budgeting, budgetary control
4) Essentials in budgetary control
5) Requisites for budgetary control system
6) Merits & limitations
7) Zero-based budgeting
8) Difference in Traditional & Zero based budgeting.
1.1 identify the type of accounting
1.2 difference between Cost Accounting , Cost Accountancy and Costing
1.3 understand the Management information needs
1.4 identify the objectives of cost accounting
1.5 difference between Cost Accounting Vs. Financial Accounting
1.6 identify the role of cost accountant
Capital and Revenue Expenditure
Before preparing the financial statements of business organisation’s, we should get information about capital and income expenses and capital and income receipts, because having a clear knowledge of these helps in preparing the income statement and balance sheet.
At the end of the financial year, Final Accounts are prepared by every business, in which Trading and Profit & Loss Account and Balance Sheet are included. Items given in the trial balance are entered either in the trading and profit and loss account or in the balance sheet. For this, it is very important to divide the items given in the trial balance into income and capital, because all the income items given in the balance sheet ie income expenditure and income receipts are written in the business and profit and loss account, while all the capital expenditure and capital receipts are written in the balance sheet. (Position Details) are written in.
Therefore, before preparing the final accounts, it is very necessary to divide the items of trial balance into capital and income. Due to wrong classification of any item into capital and income, the amount of profit or loss reported by the profit and loss account will be wrong and the balance sheet will also not give the correct and proper financial position as on that date.
Classification of Expenditure
Expenses can be divided into three categories :
Expenditure
1. Capital Expenditure
2. Revenue Expenditure
3. Deferred Revenue Expenditure
Is accounting troubling you? Are you confused about accounting concepts and standards? Our experts follow analytical approach to resolve accounting problems in proper and efficient manner for better understanding and improved grades. Browse our website to know more on accounting assignment help.
1Acquisition cost of long-lived assets the following items repr.docxfelicidaddinwoodie
1
Acquisition cost of long-lived assets: the following items represent expenditures (or receipts) related to construction of a new home office for Lowery company.
Cost of land site, which include an old apartment building appraised at $75,000 $165,000
Legal fees, including fee for title search $2100
Payment of apartment building mortgage and related interest due at time of sale $9300
Payment for delinquent property taxes assumed by the purchaser $4000
Cost of razing the apartment building $17,000
Proceeds from sale of salvaged materials ($3800)
Grading to establish proper drainage flow on land site $1900
Architects fee on new building $300,000
Proceeds from sales of excess dirt (from basement excavation) to owner of adjoining property (that was used to fill in a low area on property) ($2000)
Payment to building contractor $5,000,000
Payment of medical bills of employee accidentally injured while inspecting building construction
$1400
Special assessment for paving city sidewalks (paid to city) $18,000
Cost of paving driveway parking lot $25,000
Cost of installing lights in parking lot $9200
Premium for insurance on building during construction $7500
Cost of open house party to celebrate the opening of new building $8000
Required
From the given data, calculate the proper balances for land, building, and land improvements accounts of Lowery Company.
2
Depreciation method: on January 2, Roth Inc. purchased a laser cutting machine to be used in the fabrication of a part for one of its key products. The machine cost $80,000, and its estimated useful life was four years or 1 million cuttings, after which it could be sold for $5000.
Required
Calculate the depreciation expense for each year of the machines useful life under each of the following depreciation methods:
a. straight-line
b. double declining balance
c. Units of production. Assume annual production and cuttings of:
a. 200,000
b. 350,000
c. 260,000
d. 190,000
3
Depreciation method: on January 2, 2012, Alvarez Company purchased an electroplating machine to help manufacture a part for one of its key products. The machine cost $218,700 and was estimated to have a useful life of six years or 700,000 pleadings, after which it could be sold for $23,400.
Required
a. calculate each year’s depreciation expense for the period 2012-2017 under each of the following depreciation methods:
1. straight-line
2. double declining balance
3. Units of production. (Assume annual production in pleadings of:
i. 140,000
ii. 180,000
iii. 100,000
iv. 110,000
v. 80,000
vi. 90,000
b. Assume that the machine was purchased on September 1, 2012. Calculate each year’s depreciation expense for the period 2012 through 2018 under each of the following depreciation methods:
1. straight-line
2. double declining balance
4
Accounting for planting and intangible assets: selected transactions of Continental publishers Inc., ...
Difference between capital expenditure and revenue expenditure
1. Difference between Capital Expenditure and
Revenue Expenditure
Revenue Expenditure
1. Its effect is temporary, i.e. the benefit is received
within the accounting year.
2. Neither an asset is acquired nor is the value of an
asset increased
3. It has no physical existence because it is incurred
on items which are used by the business
4. It is recurring and regular and it occurs repeatedly
2. Continued…
5. A portion of this expenditure (depreciation on
assets) is shown in trading & P & L A/c and the
balance is shown in the balance sheet on asset
side
6. This expenditure helps to maintain the business
7. The whole amount of this expenditure is shown
in trading P & L A/c or income statement
8. It does not appear in the balance sheet.
9. It reduces revenue (profit) of the business.
3. Capital Expenditure
1. Its effect is long-term, i.e. it is not exhausted within
the current accounting year-its benefit is received
for a number of years in future
2. An asset is acquired or the value of an existing asset
is increased
3. Generally it has physical existence except intangible
assets
4. It does not occur again and again. It is nonrecurring
and irregular
5. This expenditure improves the position of the
business
4. Continued…
6. It appears in the balance sheet until its
benefit is fully exhausted
7. It does not reduce the revenue of the
concern. Purchase of fixed asset does not
affect revenue.
5. Example:
State with reasons whether the following items of
expenditure are capital or revenue
• (i) Wages paid on the purchase of goods.
• (ii) Carriage paid on goods purchased.
• (iii) Transportation paid on machinery purchased.
• (iv) Duty paid on machinery.
• (v) Duty paid on goods.
6. Continued…
(vi) A second-hand car was purchased for £7,000 and
£5,000 was spent for its repairs and overhauling.
(vii) Office building was whitewashed at a cost of
£3,000.
(viii) A new machinery was purchased for £80, 000 and
a sum of £1,000 was spent on its installation and
erection.
(ix) Books were purchased for £50,000 and £1,000 was
paid for carrying books to the library.
7. Continued…
• (x) Land was purchased for £1, 00,000 and
£5,000 were paid for legal expenses.
• (xi) £50,000 was paid for customs duty and
freight on machinery purchased from Japan.
• (xii) Old furniture was repaired at a cost of
£500.
• (xiii) An additional room was constructed at a
cost of £15,000.
8. • (xiv) Damages paid on account of the breach
of contract to supply certain goods.
• (xv) Cost of replacement of an old and worn
out part of machinery.
• (xvi) Repairs to a motor car met with an
accident.
• (xvii) £10,000 paid for improving a machinery.
• (xviii) Cost of removing plant and machinery
to a new site.
8
9. Continued…
• (xix) Cost of acquiring the goodwill of an old firm.
• (xx) Cost of redecorating a cinema hall.
• (xxi) Cost of putting up a. gallery in a cinema hall.
• (xxii) Compensation paid to a director for loss of
his office.
• (xxiii) Premium paid on the redemption of
debentures.
• (xxiv) Costs of attending a mortgage.
• (xxv) Commission paid on issue of debentures.
10. Continued…
• (xxvi) Cost of air-conditioning the office of the
director of a company.
• (xxvii) Repairs and renewal of machinery.
• (xxviii) Cost of acquiring patent rights and trade
marks.
• (xxix) Compensation paid to workers for
termination of their services.
• (xxx) Compensation paid to a person injured by
company's car.
• (xxxi) Expenditures incurred on alteration in
windows ordered by local authorities.
11. • (xxxii) Painting expenditures of a newly-
constructed factory.
• (xxxiii) Expenditures incurred on renewal of
patent.
• (xxxiv) Expenditures on replacement of a slate
roof by a glass roof.
• (xxxv) £10,000 spent on
dismantling, removing and reinstalling
machinery and
fixtures.
• (xxxvi) legal expenses incurred in an income
tax appeal.