EXPENSES

Basis Capital Expenditure Revenue Expenditure Deferred Revenue

Expenditure
Meaning / You pay cash and in You pay cash and in exchange you You pay cash and in
Identification exchange you consume consume benefit in the current year. exchange you consume a
benefit for more than a part of the benefit in the
year. current year and the
remaining in the next
couple of years.
Questions 1. Acquisition of - -
that can Asset?
answer if it is 2. Increasing the
a capital earning capital?
expenditure 3. Incidental
or not. Expenditure?
4. Result in a benefit
for a long time?

Note: If the answer for

any of the above
questions is yes then it is
a capital expenditure and
if no then revenue
expenditure.
Example 1. Land and Building 1. Selling and Distribution 1. Heavy preliminary
2. Furniture and 2. Financial Expenditure expense for
Fixture 3. Administrative Expenditure starting a new
3. Vehicles 4. Other Expenditure: business.
4. Loose Tools • Loss by Fire 2. Heavy
5. Plant and • Theft advertisement
Machinery • Loss on sale of Asset expenses for
6. Expenses incurred • Depreciation, etc. advertisement of a
on upgradation of new product.
plant, etc. 3. Heavy
development
expenditure on
property.
4. Heavy expenditure
for improving the
machinery.
5. Expenditure on
research and
development.