Question

Difference between revenue expenditure and capital expenditure.Solution

Answer 1

• Capital expenditures are fixed assets like property plant and equipment. Revenue expenditures are short-term expenses used in the current period or typically within one year.

• Capital expenditures are typically a larger amount than revenue expenditures. However, there are exceptions when large asset purchases are consumed in the short term or in the current period.

• Capital expenditures are typically expensed over many periods or years through depreciation whereas revenue expenditures are expensed in the current year or period.

• Capital expenditures are funds used by a company to acquire, upgrade, and maintain physical assets such as property, industrial buildings, or equipment. Capital expenditures are often used to undertake new projects or investments by a company. Typically, the purpose of capital expenditures is to expand a company's ability to generate earnings, whereas revenue expenditures include the operational costs of running a business and the maintenance costs that are necessary to keep the asset in working order.

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