State the difference between revenue and capital expenditure.
Answers
The differences between capital expenditures and revenue expenditures include whether the purchases will be used over the short-term or long-term. Revenue expenditures are typically referred to as ongoing operating expenses. Capital expenditures are typically one-time large purchases of fixed assets that will be used for revenue generation over a longer period.
Capital Expenditures :
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.