Question

Make two imaginary journal entries on treating capital expenditure as revenue expenditure.
pleaseeeee...​

Answer 1

When we treated Capital Expenditure as revenue expenditure, then the Balance of Income Statement is understated in the current year but the net income shown in the Income Statement in the next accounting year will be overstated as we do not charge any Depreciation On Non- Current Assets.

OR

When a business makes a purchase, it's generally a capital expenditure or a revenue expenditure. Revenue expenditures are normal business expenses that use an asset, like cash, to produce a good or a service. On the other hand, capital expenditures are long-term assets that bring future benefit to the company. Incorrectly recording a capital expenditure has consequences for both financial and tax accounting.

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