Distinguishbetween capital and revenue expenditure and state whether thefollowing statements are items of capital or revenue expenditure:
(a)Expenditure incurred on repairs and whitewashing at the time ofpurchase of an old building in order to make it usable.
(b)Expenditure incurred to provide one more exit in a cinema hall incompliance with a government order.
(c)Registration fees paid at the time of purchase of a building
(d)Expenditure incurred in the maintenance of a tea garden which willproduce tea after four years.
(e)Depreciation charged on a plant.
(f)The expenditure incurred in erecting a platform on which a machinewill be fixed.
(g)Advertising expenditure, the benefits of which will last for fouryears.

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Solution

Basis of Difference

Capital Expenditure

Revenue Expenditure

Meaning

It is incurred to increase the earning capacity of a business.

It is incurred to maintain the earning capacity of a business.

Purpose

It is incurred to acquire fixed assets to carry out operations.

It is incurred to conduct day to day activities.

Benefits

The benefits of such expenditures can be availed for more than one year.

The benefits of such expenditures can only be availed for one year.

Nature

It is non-recurring by nature.

It is generally recurring in nature.

Shown

Capital expenditure is shown in the assets side of the Balance Sheet.

Revenue expenditure is shown in the debit side of the trading and Profit and Loss Account.

(a) Capital expenditure
(b) Revenue expenditure
(c) Capital expenditure
(d) Capital expenditure
(e) Revenue expenditure
(f) Capital expenditure
(g) Deferred revenue expenditure

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Similar questions

Distinguish between capital and revenue expenditure and state whether the following statements are items of capital or revenue expenditure.
(a) Expenditure incurred on repairs and whitewashing at the time of purchase of an old building in order to make it usable.
(b) Expenditure incurred to provide one more exit in a cinema hall in compliance with a government order.
(c) Registration fees paid at the time of purchase of a building.
(d) Expenditure incurred in the maintenance of a tea garden which will produce tea after four years.
(e) Depreciation charged on a plant.
(f) The expenditure incurred in erecting a platform on which a machine will be fixed.
(g) Advertising expenditure, the benefits of which will last for four years.

Q. State whether the following expenses are capital or revenue in nature:
(i) Expenses on whitewashing and painting of a building purchased to make it ready for use.
(ii) ₹ 10,000 spent on constructing platform for a new machine.
(iii) Repair expenses of ₹ 25,000 incurred for whitewashing of factory building.
(iv) Insurance premium paid as renewal premium.
(v) Purchased a new car.

Q. Match List-I(Item of expenditure/receipt) with List-II(Nature of expenditure/receipt) and select the correct answer using the codes given the lists.

List-I	List-II
I. Carriage charges a new machine purchased for factory	(a) Revenue receipt
II. Legal expenses incurred in defending a case of violation of a provision of Factories Act	(b) Revenue expenditure
III. Grant-in-aid received from the Government for the construction of a building	(c) Deferred revenue expenditure
IV. Amount received for a part of the office building sublet	(d) Capital expenditure
	(e) Capital receipt

Q. Classify the following expenditures as intermediate consumption expenditure and final consumption expenditure.
(i) Expenditure on research and development by Tata.
(ii) Insurance premium paid by a firm to an insurance company.
(iii) Insurance premium paid by households to an insurance company.
(iv) Expenditure on repairs and maintenance of plant and machinery.
(v) Expenditure incurred by a firm on purchase of equipments.
(vi) Advertising expenditure incurred by Airtel on promotion of Its products.
(vii) Business expenses of the employees on tour and entertainment.

Q. Heavy expenditure incurred on advertisement at the time of introducing a new product is a Deferred Revenue Expenditure.

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Basis of Difference	Capital Expenditure	Revenue Expenditure
Meaning	It is incurred to increase the earning capacity of a business.	It is incurred to maintain the earning capacity of a business.
Purpose	It is incurred to acquire fixed assets to carry out operations.	It is incurred to conduct day to day activities.
Benefits	The benefits of such expenditures can be availed for more than one year.	The benefits of such expenditures can only be availed for one year.
Nature	It is non-recurring by nature.	It is generally recurring in nature.
Shown	Capital expenditure is shown in the assets side of the Balance Sheet.	Revenue expenditure is shown in the debit side of the trading and Profit and Loss Account.