Capital and Revenue Expenditure

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Revenue Expenditure is a payment for the daily running of non-current assets. It is recorded as an expenseRevenue Expenditures benefit the business for less than 1 accounting period.

Recall!Non-current assets are assets that are used in the daily operation of a business.Non-current assets cannot be converted to cash easily.A non-current assets provides benefit of more than 1 accounting period to the business.

Capital Expenditure is a payment for the purchase of non-current assets. It is recorded as an assetCapital Expenditures are recorded at its original price(in accordance to the historical cost concept), including payments to make the non-current assets ready to be used(in accordance to the going concern concept) Capital Expenditures benefit the business for more than 1 accounting period.

Capital and Revenue Expenditure

To determine if a payment is a capital or revenue expenditure, clarify it in accordance to the materiality concept