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Capital expenditure and revenue expenditure
While categorizing expenditure on fixed assets it can be distinguished into capital expenditure and revenue expenditure. The distinction between such expenditure is quite important as capital expenditure is found in cost of fixed asset.
- Capital expenditure:
This would include costs that are involved on acquisition of fixed asset and other expenditure which will help to increase earning capacity of existing fixed asset. While dealing with our treatment of capital and revenue/expenditure homework help, you will also be acquainted with the fact that cost of acquisition not only includes cost of purchases, but can also include any additional costs that incurs bringing any fixed assets to current location.
- Revenue expenditure:
It is an expenditure that would incur only on fixed assets and this may include costs that are usually reflected as maintenance while improving any earning capacity of assets. Such costs would get involved on regular basis and the benefit obtained is reflected over a short period of time.
Purpose of these expenditures
The main purpose of capital expenditure is to focus on expansion of a company and make it efficient enough to generate earnings. Treatment of capital and revenue/expenditure assignment help will also make you aware that revenue expenditure helps in maintaining the ability of a company to operate.
- Revenue expenses are said to be short-term expenses and need to meet up with current operational costs
- Revenue expenses are completely tax deductable in the same year of expenses that occurs
- Such expenditures can be called as recurring expenses compared to the one which is off-nature of capital expenditures
- The expenditure include maintenance costs and ordinary repair which is important to keep up asset in proper condition
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