what is the difference between capital expenditure and revenue expenditure
Answers
Answer:
Explanation:
Capital Expenditure
The amount spent or incurred on acquiring a non-current asset is treated as capital expenditure. The same principle applies to the purchase of a business as a going concern concept of accounting.
Capital expenditure include purchase price of non-current assets plus the identical costs connected with the acquisition of non-current assets, e.g., installation costs on machine, import duty on imported cars, brokerage on the purchase of investments, registration charges for transfer of property rights, conveyance and mortgage charges in connection with a purchase, etc.
The capital expenditures increase the earning capacity of the business
Revenue Expenditure
The amount incurred in the acquisition of inventories for sale or production is considered as revenue expenditure. For example, wages and salaries, oil and power, administration and insurance, bad debts, interest, depreciation of fixed assets, etc.The revenue expenditures just maintain the earning capacity of the business.