capital and revenue expenditure and receipts pdf

1. borrowing) or (ii) reduce assets (e.g. Expenditures meaning spends or will be spent some amount on the purchase of goods and avail services. 0 Thank you . It refers to the distinction of capital from revenue expenditure for tax purposes. Expenditure means spending on something. Capital expenditure 6. View 1.pdf from ACCOUNTING LY1023 at Cambridge. It does not result in … The capital nature and the revenue nature differ from each other on the basis of the time for which the purchases will be used. Capital receipts; Revenue receipts; Capital receipts Explanation: Capital receipts include the following: Receipts from the sale of fixed assets of a business. Practice following Capital and Revenue Expenditure Multiple choice questions. 1.58 PRINCIPLES AND PRACTICE OF ACCOUNTING UNIT 4 : CAPITAL AND REVENUE EXPENDITURES AND RECEIPTS LEARNING OUTCOMES After studying this unit, you will Authors; Authors and affiliations; Margaret Nicholson; Chapter. Capital expenditure is not matched with the capital receipts. Remember Multiple choice questions are having good weightage in the total marks of … Financial Statements - I 335 9.2.2 Receipts The similar treatment is given to the receipts of the business. Let’s look at the most prominent ones – Capital receipts are non-recurring in nature; on the other hand, revenue receipts are recurring in nature. Capital Expenditure is expenditure that is:- Long-term in nature (used in the business for more than one accounting period) and increases the earning capacity of the business, e.g. `ߵ��2��YɄ�|J'��sEt�?i�-;xzhC��JZ_�[�.��f]^�h��1. ��0��PA�ٗg�2��ƫ!�E�:��\jy��O��:��!꟥-�5��#�)�޼�.��Zҹ�'�Khi��l�WCN̟/�:�Z81��W�T�? Failure to make distinction between capital and revenue items will result in A] under trading Capital and Revenue Expenditure and Receipts. Capital Nature . 2. Receipts which are recurring (received again and again) by nature and which are available for meeting all day to day expenses (revenue expenditure) of a business concern are known as "Revenue receipts", e.g. Depending on the nature of the capital expenditure it may be possible to claim capital allowances. An expense is a word very similar to expenditure but expense shows the deduction in the value of the asset while expenditure simply denotes the obtaining of as… The treatment of deferred revenue expenditure is same as of capital expenditure. %PDF-1.6 %�� « Prev. %%EOF Comparison between Revenue Expenditure and Capital Expenditure . Experts view that capital goods available for use as a factor of production. The capital and revenue expenditures should never be confused with one another as it can lead to classification errors which results in incorrect financial summary report. These can be paid in cash or credit or in kind. Robert . Routine maintenance of roads, bridges & footpaths (e.g. It’s not enough to say that capital expenditures are everything that revenue expenditures aren’t. RD = Revenue Expenditure – Revenue Receipts : The fiscal deficit is the difference between the government’s total expenditure (both revenue and capital) and its total receipts excluding borrowings. Solved Example and Problem 1: Which of the following expenditures are capital or revenue, give your reasons? Revenue Expenditure Treated as Capital Expenditure. ��.�\��r�&�5U�.5|��?�r��V��P��j�\LWt~�^�-��Rg��}�z�!�xGG��I��Ee�pNd>8�l�}(�-!�?=��VWk,�� n��w��H�>�[��ǰW��ahV]ב�Ü��Y@]�bo�e:�L�M�W5��Cč�hiҬ� Deferred Revenue expenditure 7. FD= Total Expenditure- (Revenue Receipts+ Non-Debt Creating Capital Receipts) Measuring Government Deficits . Following are the key examples of capital expenditures. Capital expenditure 5. Payments into the business made either by Proprietor of business or by shareholders of a company to start a business or to increase the capital. Capital Expenditure is that expenditure which results in increasing of government asset (giving out loans) or reduce in some liability (paying back old loans). Capital expenditure 8. Amount received from the sale of inventory. endstream endobj 63 0 obj <>>>/Filter/Standard/Length 128/O(��L�dM��M��p��!66)/P -3388/R 4/StmF/StdCF/StrF/StdCF/U(��z�I��\nj��B, )/V 4>> endobj 64 0 obj <>/OCGs[94 0 R]>>/PageLabels 55 0 R/Pages 57 0 R/Type/Catalog>> endobj 65 0 obj <>/ExtGState<>/Font<>/ProcSet[/PDF/Text]>>/Rotate 0/TrimBox[18.0 36.0 594.0 774.0]/Type/Page>> endobj 66 0 obj <>stream Receipts and invoices keep the records of expenditures. Amount received from IDBI as a medium term loan for augmenting working capital. Enjoy the videos and music you love, upload original content, and share it all with friends, family, and the world on YouTube. Extending a building. disinvestment) are called capital receipts. Capital and Revenue Expenditure and Receipts What is Capital Expenditure? sale proceeds of goods, interest received, commission received, rent received, dividend received etc. Capital expenditures vs. revenue expenditures. Capital receipts and revenue receipts should never be confused with each other as it can lead to classification errors and an incorrect financial summary report. business expense that is made to acquire an asset or to improve the capacity of an asset Revenue Expenditure: Capital Expenditure : 1. A. Classify the following receipts as either capital receipts or as revenue receipts. H��T�n�0��+\�:R� g�H��v��K!�ę��v��p�>/ۯ˟ @��Xn��VzmA�Ƈ~ �s\u��|��{�s��j.ǐ��*PU��5Rp�s After studying this unit, you will be able to: w Learn the criteria for identifying Revenue Expenditure and distinguishing from Capital Expenditure w Learn the distinction between capital and revenue receipts. �� *�V�-f�!�ҙ��Ы��Wl=@+�*��\39��T9�Z?�B��3e�Rg �«@��/�tm��j��ҕt�m-��/��B�-O��H&gѵ�i��@��榱ۼ�\��u��5R�ge�ۑ:�2��c�u��@�~��N�(M�#��O��j�f{2+�c�z�ᙪ�ti�5�^��җ�ҖW�ny�8�l��D��2�X]��KL8;-S�[z~��/��I�ߣ�{+GvV�Q��4 �ڝO��7��7�R�8g� ʲ�b�T��?��I��K��s�� Structural repairs on a building, where the value has been written down in the accounts to reflect damage. capital and revenue 1.2 capital and revenue 1.3. capital and revenue 1.4 capital and revenue 1.5. capital and revenue 1.6. capital and revenue 1.7 capital and revenue 1.8 student notes:- bank reconciliation statement 2.1 topic 2. bank reccnciliation state . and To know the meaning of Capital and Revenue Expenditures, first of all, we have to know the meaning of the Expenditures. If the receipts imply an obligation to return the money, these are capital receipts. Receipts which are not revenue are capital receipts (e.g. Capital receipt 4. (g�Mɨ~WM�U@�0�`�BL�C��ɥȠ9�� 8��ӕ�] �\��b�/'��Z|cW��w\pLCt��5"[�q@[+g[X0�\A��T�nd넝��5=��C��e��f]��{�/��N��t`%~��q6�U��]�eIΡ7��K�2P,EU��Q9��N>=��b�k}�tP�u��>��)��I��h�M��~�>m��~K��4%&�՗��٪n�{|:N�[�zA��f��&��?�N��8E��zs*):3,lޑ��]�N+@� �}�[�w�n�[Ѧ��_��u3C��@:�x��oI�`�x�s�d cW*p%��U�9��;ɗ� ��r��y�|��h�-�h��&a�:do!��_ڹof� va,-T��KB��%w�D��>�կF�w�m��f,8�ˈ�Y;� Receipts of loan from partners, bankers and private individuals. �;��Γ�^�_�O� �fj� Revenue expenditure 3. (a) Cost of overhauling and painting a recently bought old van. It is incurred for acquisition of capital assets. endstream endobj startxref H�lSMkA�ﯘ�]�4;�`��Bi��B��)u��5��Ҍ��`��'�_u��;��j��WߪE_]ud��:n�r渾��x�0�k! Capital Receipts: Government receipts which either (i) create liabilities (e.g. Capital Receipts vs. Revenue Receipts – Key differences. filling potholes). Cartage and Freight − If those are incurred to bring Fixed Assets. *��ؗ7�b�l/��;��`^156��wI%�4�o��/��q��2*V�Q�7�X��&R�V�3�2��]Ǎ�/� �6H� Importance of Distinguishing between Capital & Revenue Items •TO DETERMINE WHICH ITEMS APPEAR IN WHICH FINANCIAL STATEMENT. @�g`z� � �� A D V E R T I S E M E N T. Leave a comment Cancel reply. A] Revenue receipt B] Revenue expenditure C] Capital expenditure D] Capital receipt 10. Here, please note that Loan recovery is Capital Receipt but the interest received on these loans is revenue receipts. Plus, capital expenditures will show up differently on your reporting metrics. You may click the link to find Multiple choice questions (Q.No-1 to 10) on Capital and Revenue Receipts and Payments.. �. Capital Expenditures and Revenue Expenditures; Capital Receipt and Revenue Receipt; Capital Nature and Revenue Nature. Let’s now understand both of them in detail. Next » By Rashid Javed (M.Com, ACMA) Back to: Capital and revenue items (explanations) Show your love for us by sharing our contents. The cost of the purchase of the asset e.g. ‘Capital v Revenue expenditure’ is a term used throughout this toolkit. These expenditures are met out of capital receipts of the government including capital transfers from rest of the world. There are many differences between capital receipts vs. revenue receipts. (a) Capital expenditures (b) Revenue expenditures (c) Capital receipt (d) Revenue receipt 20. Keywords: Capital, revenue, receipts, expenditure, expense, gains, profit or loss. 122 0 obj <>stream purchase of machinery, vehicles, land and building. 62 0 obj <> endobj 114 Downloads; Abstract. Revenue receipts are further classified Into Tax Revenue and Nontax Revenue as explained in Section 9.6. A debt recorded as bad in the earlier year recovered during the year is a A] Revenue receipt B] Revenue expenditure C] Capital expenditure D] Capital receipt 11. 1. Capital expenditure may include the following expenditures:- Expenditure incurred on the acquisition of fixed assets, (tangible or intangible) which … �Z��`��l�,ڙ�M ~��eљhA��C~6�2��}|]��N�� 8��vِ��l�p#D;��[�A�V��.�@͝��i�A�9�k@n��z#��Hs�f��AN�z]��(��fi�O�No;r�#��Zc�̯�#�U�y3�d��pkg��W�+�U+튺>��'��[=m=ɷ�7�7��T�� _i�K'3��pGs. Preview. Purchase a building Rent a building Buy a new vehicle Repair a vehicle Addition to a new building Redecorating existing building Installation cost of new equipment Electricity costs of using the equipment . Note: There are 5 questions (A to E) in this Capital and Revenue Receipts Worksheet. It is important to understand the distinction between the two types of expenditure and the two types of receipts as this is one of the fundamental principles of accounting. Unlike revenue expenditure, which is … This can be a payment is cash or can also be the exchange of some valuable item in exchange for goods or services. Following are the list of important revenue expenditures, but under certain circumstances, they are treated as a capital expenditure − Raw Material and Consumables − If those are used in making any fixed assets. Capital expenditures; Revenue expenditures; Capital expenditures Definition and explanation of capital expenditures: An expenditure is a capital expenditure if the benefit of the expenditure extends to several trading years. CAPITAL EXPENDITURE REVENUE EXPENDITURE . CAPITAL AND REVENUE EXPENDITURES AND RECEIPTS 2. In the same way as production is means for consumption. Capital receipt = Shown as a liability or reduce the value of a capital expenditure. receipts from sale of fixed assets or investments, loan taken, Capital introduced). (b) Cost of pulling down an old building in order to replace it by a new one. A D V E R T I S E M E N T. 2 Comments on Capital and revenue expenditures. Capital and Revenue Receipts Worksheet - 2. Expenditure that is capital is generally not allowable as a revenue deduction in computing taxable profits. Educators may download these worksheets (Printable PDF form) from resources section of this website for classroom use. h�bbd```b``��@$��tD�~�|l`�6�l��Ko�bn`�e`�fV��`�iXD��Drg�H�0)t�R �(�v�U�� s`q�! Capital Expenditure attempts to improve the earning capacity of the entity. Introduction Capital means material wealth in the form of money or property which can be used to produce further wealth or income. They break down differently, depending on the size of the payment and the time across which it needs to be paid for. 2015-16. Maintaining a building (re-pointing, repairing minor cracks, painting etc). This is a preview of subscription content, log in to check access. capital and revenue 1.1 topic 1. capital and revenue expenditures and receipts . … 92 0 obj <>/Encrypt 63 0 R/Filter/FlateDecode/ID[]/Index[62 61]/Info 61 0 R/Length 132/Prev 135502/Root 64 0 R/Size 123/Type/XRef/W[1 3 1]>>stream endstream endobj 58 0 obj <>stream It is the process of causing a liability by a commodity. Hence, both capital and revenue expenditures are ultimately transferred to profi t and loss account. Next » By Rashid Javed (M.Com, ACMA) Back to: Capital and revenue items (explanations) Show your love for us by sharing our contents. Government revenue is the means for government expenditure. From the example, you should note that: Any money spent when a fixed asset is . Capital Expenditure Revenue Expenditure Structural maintenance of roads, bridges & footpaths. Loan disbursals. They are also written-off over their expected period of benefit. Revenue receipts are credited to the Profit and Loss A/c. Capital Expenditures. Revenue receipt = Shown as income in income statement. Revenue and capital receipts are recognized on accrual basis as soon as the right of receipts is established. @��'S�8�W� ��[�Q&�%-�0�m !��3^kCY8�"��Ƞ��D��t��~��Ӌ��y��[��]��#��>.��:�A]�k�U��h[;X49�UbyD�_~$�b2̶ �ޓ}߄� �w��J��n��}�;-2�+�!�^�?J¦��ZX9� ��j9^�ʄ�9�׌@@��rԣ��5�w��L�ڲ�u��Ò~��l�}�V^&�4g��R�l��2c�U`R��a�!�� endstream endobj 57 0 obj <>stream Capital & Revenue Expenditure & Receipts 5��0F��F��l*�d2A��v�N�� On the contrary, revenue expenditure aims at maintaining the earning capacity of the company. Deferred Revenue expenditure . 2,500 spent on the overhaul of machines purchased second-hand. It is incurred for normal running of government departments and maintenance. (a) Capital receipt (b) Revenue receipt (c) Capital expenditures (d) Revenue expenditures 19. To know the Difference Between capital and revenue expenditures we have to know the meaning of both terms.
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