Difference between Capital Expenditure and Revenue Expenditure:
Revenue Expenditure Capital Expenditure 1. Its effect is temporary, i.e. the benefit is received 1. Its effect is long-term, i.e. it is not exhausted within the current accounting year-its benefit within the current accounting year-its benefit is received for a accounting year. number of years in future. 2. Neither an asset is acquired nor the value of an 2. An asset is acquired or the value of an existing asset is asset is increased. increased. 3. It has no physical existence because it is incurred 3. Generally it has physical existence except intangible on items which are used by the business. assets. 4. It is recurring and regular and it occurs repeatedly. 4. It does not occur again and again. It is nonrecurring and irregular. 5. This expenditure helps to maintain the business. 5. This expenditure improves the position of the business. 6. The whole amount of this expenditure is shown in trading 6. A portion of this expenditure (depreciation on assets) is P & L A/c or income statement. shown in trading & P & L A/c and the balance is shown in the balance sheet on asset side. 7. It does not appear in the balance sheet. 7. It appears in the balance sheet until its benefit is fully exhausted. 8. It reduces revenue (profit) of the business. 8. It does not reduce the revenue of the concern. Purchase of fixed asset does not affect revenue. |