Question

difference btw Capital expenditure and revenue expenditure. ​

Answer 1

Answer:

• Capital expenditures represent major investments of capital that a company makes to maintain or, more often, to expand its business and generate additional profits. Capital expenses are for the acquisition of long-term assets, such as facilities or manufacturing equipment. Because such assets provide income-generating value for a company for a period of years, companies are not allowed to deduct the full cost of the asset in the year the expense is incurred; they must recover the cost through year-by-year depreciation over the useful life of the asset. Companies often use debt financing or equity financing to cover the substantial costs involved in acquiring major assets for expanding their business.

• Expenditures for generating revenue include expenses required to meet the ongoing operational costs of running a business, and thus are essentially the same as operating expenses. Unlike capital expenditures, revenue expenses can be fully tax-deducted in the same year the expenses occur. Expenditures for maintenance of revenue-generating assets include the ordinary repair and maintenance costs that are necessary to keep the asset in working order without substantially improving or extending the useful life of the asset. Revenue expenses related to existing assets include repairs and regular maintenance as well as repainting and renewal expenses. Revenue expenditures can be considered to be recurring expenses in contrast to the one-off nature of most capital expenditures.

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