Chapter 16

capital expenditure
revenue expenditure 

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Capital and revenue expenditure

Capital expenditure is expenditure incurred on the purchase, alteration or improvement of Non current assets. Costs such as:

  • Delivery of non current assets
  • Installation of non current assets
  • Improvement but not repair of non current assets
  • Legal costs of buying a property

A common example is the purchase of a car for use in the business.

Revenue expenditure is expenditure incurred on running expenses. such as:

  • Maintenance and repair of non current assets
  • Staff and training costs
  • Administration of the business
  • selling and distributing the goods/products the business trades.

An example is the cost of petrol/diesel for the car used in the business. 

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Capital and revenue expenditure differences

Capital expenditure is shown on the balance sheet.
Revenue expenditure
is an expense in the income statement.

                          Capital expenditure                      Revenue expenditure 

Property -            cost of property                            insurance of property
                          cost of extension                         general maintenance
                      installation of utilities                        repairs
                             legal fees                                  redecoration

Vehicles-          cost of vehicle                              fuel
                         delivery costs                              tax disc
                        number plates                             insurance of vehicle
                       changes to vehicle                        servicing and repairs

Machinery/            Cost of asset                           servicing or repairs
Computers/          installation and testing               staff training
Office equipment-  modifications                             insurance of asset        

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