Capital Expenditures and Revenue Expenditures; Capital Receipt and Revenue Receipt; Capital Nature and Revenue Nature. Capital expenditure 6. Revenue and capital receipts are recognized on accrual basis as soon as the right of receipts is established. Solved Example and Problem 1: Which of the following expenditures are capital or revenue, give your reasons? 92 0 obj
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and To know the meaning of Capital and Revenue Expenditures, first of all, we have to know the meaning of the Expenditures. A] Revenue receipt B] Revenue expenditure C] Capital expenditure D] Capital receipt 10. From the example, you should note that: Any money spent when a fixed asset is . 1. It refers to the distinction of capital from revenue expenditure for tax purposes. Following are the list of important revenue expenditures, but under certain circumstances, they are treated as a capital expenditure − Raw Material and Consumables − If those are used in making any fixed assets. Capital Expenditure is expenditure that is:- Long-term in nature (used in the business for more than one accounting period) and increases the earning capacity of the business, e.g. Remember Multiple choice questions are having good weightage in the total marks of … sale proceeds of goods, interest received, commission received, rent received, dividend received etc. In the same way as production is means for consumption. They break down differently, depending on the size of the payment and the time across which it needs to be paid for. Let’s look at the most prominent ones – Capital receipts are non-recurring in nature; on the other hand, revenue receipts are recurring in nature. This is a preview of subscription content, log in to check access. You may click the link to find Multiple choice questions (Q.No-1 to 10) on Capital and Revenue Receipts and Payments.. disinvestment) are called capital receipts. Comparison between Revenue Expenditure and Capital Expenditure . H�lSMkA�ﯘ�]�4;�`���Bi��B��)u���5��Ҍ��`������'�_u��;����j���WߪE_]ud��:n�r渾�����x�0�k! 114 Downloads; Abstract. h�bbd```b``���@$��tD�~�|l`�6�l����Ko�bn`�e`�fV����`�iXD���Drg�H�0)t�R �(�v�U�������� ��s`q�! Expenditure means spending on something. purchase of machinery, vehicles, land and building. Routine maintenance of roads, bridges & footpaths (e.g. It is important to understand the distinction between the two types of expenditure and the two types of receipts as this is one of the fundamental principles of accounting. 2015-16. (b) Cost of pulling down an old building in order to replace it by a new one. ��.�\���r�&�5U�.5|��?�r���V�����P��j�\LWt~�^�-��Rg���}�z�!�xGG���I���Ee�pNd>8�l�}(�-!�?=��VWk,�� ��n��w��H�>�[���ǰW��ahV]ב�Ü��Y@]�bo�e:�L�M�W5��Cč�hiҬ� Revenue receipts are credited to the Profit and Loss A/c. 122 0 obj
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‘Capital v Revenue expenditure’ is a term used throughout this toolkit. Capital expenditure may include the following expenditures:- Expenditure incurred on the acquisition of fixed assets, (tangible or intangible) which … %PDF-1.6
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Capital and Revenue Expenditure and Receipts. There are many differences between capital receipts vs. revenue receipts. A D V E R T I S E M E N T. 2 Comments on Capital and revenue expenditures. Capital expenditure is not matched with the capital receipts. FD= Total Expenditure- (Revenue Receipts+ Non-Debt Creating Capital Receipts) Measuring Government Deficits . H��T�n�0��+\�:R� g�H������v��K!�ę���v����p�>/ۯ˟ @����Xn��VzmA�Ƈ~ �s\u��|�����{�s��j.ǐ�����*PU���5Rp�s Loan disbursals. Next » By Rashid Javed (M.Com, ACMA) Back to: Capital and revenue items (explanations) Show your love for us by sharing our contents. �. Receipts which are not revenue are capital receipts (e.g. Robert . Deferred Revenue expenditure 7. Maintaining a building (re-pointing, repairing minor cracks, painting etc). CAPITAL EXPENDITURE REVENUE EXPENDITURE . Hence, both capital and revenue expenditures are ultimately transferred to profi t and loss account. Capital expenditure 8. It is incurred for normal running of government departments and maintenance. After studying this unit, you will be able to: w Learn the criteria for identifying Revenue Expenditure and distinguishing from Capital Expenditure w Learn the distinction between capital and revenue receipts. `ߵ����2��YɄ�|J'��sEt�?i�-;xzhC��JZ_�[�.���f]^�h���1. (a) Capital expenditures (b) Revenue expenditures (c) Capital receipt (d) Revenue receipt 20. ��� *�V�-f�!�ҙ��Ы������Wl=@+�*���\39��T9�Z?�B��3e�Rg �«@��/�tm��j��ҕt�m-��/��B�-O��H&gѵ�i���@���榱ۼ�\�����u����5R�ge�ۑ:�2��c�u����@�~��N�(M�#����O��j�f{2+�c�z�ᙪ�ti�5�^���җ�ҖW�ny�8�l���D��2�X]������KL8;-S�[z~����/����I�ߣ�{+GvV�Q���4
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ʲ�b�T����?��I��K��s��� Capital receipts and revenue receipts should never be confused with each other as it can lead to classification errors and an incorrect financial summary report. Revenue receipts are further classified Into Tax Revenue and Nontax Revenue as explained in Section 9.6. Expenditures meaning spends or will be spent some amount on the purchase of goods and avail services. This can be a payment is cash or can also be the exchange of some valuable item in exchange for goods or services. A. Classify the following receipts as either capital receipts or as revenue receipts. The treatment of deferred revenue expenditure is same as of capital expenditure. *��ؗ7�b�l/��;��`^156���wI%�4�o��/��q��������2*V�Q�7�X���&R�V�3�2���]Ǎ�/� �6H�
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Capital receipts; Revenue receipts; Capital receipts Explanation: Capital receipts include the following: Receipts from the sale of fixed assets of a business. On the contrary, revenue expenditure aims at maintaining the earning capacity of the company. Revenue receipt = Shown as income in income statement. The cost of the purchase of the asset e.g. Failure to make distinction between capital and revenue items will result in A] under trading Introduction Capital means material wealth in the form of money or property which can be used to produce further wealth or income. Expenditure that is capital is generally not allowable as a revenue deduction in computing taxable profits. It is incurred for acquisition of capital assets. These expenditures are met out of capital receipts of the government including capital transfers from rest of the world. A D V E R T I S E M E N T. Leave a comment Cancel reply. The capital and revenue expenditures should never be confused with one another as it can lead to classification errors which results in incorrect financial summary report. 5��0F��F�����l*�d2A�����v�N�� Capital expenditures; Revenue expenditures; Capital expenditures Definition and explanation of capital expenditures: An expenditure is a capital expenditure if the benefit of the expenditure extends to several trading years. receipts from sale of fixed assets or investments, loan taken, Capital introduced). Extending a building. Revenue Expenditure Treated as Capital Expenditure. To know the Difference Between capital and revenue expenditures we have to know the meaning of both terms. Capital Expenditure Revenue Expenditure Structural maintenance of roads, bridges & footpaths. The capital nature and the revenue nature differ from each other on the basis of the time for which the purchases will be used. Preview. Capital Receipts: Government receipts which either (i) create liabilities (e.g. It does not result in … (a) Capital receipt (b) Revenue receipt (c) Capital expenditures (d) Revenue expenditures 19. business expense that is made to acquire an asset or to improve the capacity of an asset Keywords: Capital, revenue, receipts, expenditure, expense, gains, profit or loss. View 1.pdf from ACCOUNTING LY1023 at Cambridge. « Prev. Capital expenditures vs. revenue expenditures. filling potholes). Capital Receipts vs. Revenue Receipts – Key differences. Capital Expenditure is that expenditure which results in increasing of government asset (giving out loans) or reduce in some liability (paying back old loans). 62 0 obj
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capital and revenue 1.2 capital and revenue 1.3. capital and revenue 1.4 capital and revenue 1.5. capital and revenue 1.6. capital and revenue 1.7 capital and revenue 1.8 student notes:- bank reconciliation statement 2.1 topic 2. bank reccnciliation state . Authors; Authors and affiliations; Margaret Nicholson; Chapter. 2,500 spent on the overhaul of machines purchased second-hand. Purchase a building Rent a building Buy a new vehicle Repair a vehicle Addition to a new building Redecorating existing building Installation cost of new equipment Electricity costs of using the equipment . borrowing) or (ii) reduce assets (e.g. A debt recorded as bad in the earlier year recovered during the year is a A] Revenue receipt B] Revenue expenditure C] Capital expenditure D] Capital receipt 11. Educators may download these worksheets (Printable PDF form) from resources section of this website for classroom use. Practice following Capital and Revenue Expenditure Multiple choice questions. Receipts of loan from partners, bankers and private individuals. Cartage and Freight − If those are incurred to bring Fixed Assets. Capital Nature . … Receipts and invoices keep the records of expenditures. �;�����Γ�^�_�O� �fj�
Revenue Expenditure: Capital Expenditure : 1. Here, please note that Loan recovery is Capital Receipt but the interest received on these loans is revenue receipts. Plus, capital expenditures will show up differently on your reporting metrics. %%EOF
Note: There are 5 questions (A to E) in this Capital and Revenue Receipts Worksheet. 1.58 PRINCIPLES AND PRACTICE OF ACCOUNTING UNIT 4 : CAPITAL AND REVENUE EXPENDITURES AND RECEIPTS LEARNING OUTCOMES After studying this unit, you will These can be paid in cash or credit or in kind. Financial Statements - I 335 9.2.2 Receipts The similar treatment is given to the receipts of the business. endstream
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An expense is a word very similar to expenditure but expense shows the deduction in the value of the asset while expenditure simply denotes the obtaining of as… endstream
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Amount received from IDBI as a medium term loan for augmenting working capital. @�g`z� � ���
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