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    Capital Expenditure and Revenue Expenditure

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    Samhita
    Capital expenditures are long-term investments like property, equipment, and intangible assets that have a useful life of over one year. Revenue expenditures are short-term operational costs like direct expenses of production and indirect expenses of distribution that are used within one year. Both types of expenditures are important - capital expenditures can improve efficiency while revenue expenditures ensure smooth business operations. A business must manage both expenditures to avoid overspending.

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    Capital Expenditure and Revenue Expenditure

    Uploaded by

    Samhita
    112 views10 pages
    Capital expenditures are long-term investments like property, equipment, and intangible assets that have a useful life of over one year. Revenue expenditures are short-term operational costs like direct expenses of production and indirect expenses of distribution that are used within one year. Both types of expenditures are important - capital expenditures can improve efficiency while revenue expenditures ensure smooth business operations. A business must manage both expenditures to avoid overspending.

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    Explained concepts of capital expenditure and revenue expenditure

    Original Title

    CAPITAL EXPENDITURE AND REVENUE EXPENDITURE

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    Capital expenditures are long-term investments like property, equipment, and intangible assets that have a useful life of over one year. Revenue expenditures are short-term operational costs like direct expenses of production and indirect expenses of distribution that are used within one year. Both types of expenditures are important - capital expenditures can improve efficiency while revenue expenditures ensure smooth business operations. A business must manage both expenditures to avoid overspending.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    112 views10 pages

    Capital Expenditure and Revenue Expenditure

    Uploaded by

    Samhita
    Capital expenditures are long-term investments like property, equipment, and intangible assets that have a useful life of over one year. Revenue expenditures are short-term operational costs like direct expenses of production and indirect expenses of distribution that are used within one year. Both types of expenditures are important - capital expenditures can improve efficiency while revenue expenditures ensure smooth business operations. A business must manage both expenditures to avoid overspending.

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 10

    CAPITAL EXPENDITURE

    AND REVENUE
    EXPENDITURE
    By Samhita Majumder 9B
    What is Capital Expenditure?
    Capital expenditures are long-term investments,
    meaning the assets purchased have a useful life of
    one year or more. Types of capital expenditures can
    include purchases of property, equipment, land,
    computers, furniture, and software. Intangible assets
    include patent and licence.
    Examples of Capital
    Expenditure:
    What is Revenue Expenditure?
    Revenue expenditures are short-term expenses used in the
    current period or typically within one year. Revenue
    expenditures include the expenses required to meet the
    ongoing operational costs of running a business, and thus
    are essentially the same as operating expenses. Types of
    revenue expenditures can include direct expenses and
    indirect expenses.
    Direct Expenses
    Direct expenses are those costs that are incurred when goods and
    services are in the process of being produced. The costs that are
    incurred during the day-to-day operations that take place in the
    business are also direct expenses. For manufacturing companies,
    examples of direct expenses include the costs that are incurred for
    the conversion of raw materials to finished products or goods.
    Direct expenses also include costs such as electricity used during
    the production, wages paid to workers, legal expenses, rent, and
    shipping-related costs.
    Indirect Expenses
    Indirect expenses are the second type of revenue expenditure.
    These types of expenses are usually incurred when the finished
    goods and services are being sold and distributed. These expenses
    include taxes, salaries for employees, depreciation, and interest
    among others. Indirect expenses also include repairs and
    maintenance costs. Although these costs aren’t directly linked to
    the finished products, they are required to ensure the proper
    functioning of the asset which in turn supports the proper
    functioning of the business.
    Revenue Expenditure versus Capital
    Expenditure
    Revenue Expenditure Capital Expenditure
    •  Short term asset • Long term asset
    • Used to ensure the proper functioning • Used to improve how the business
    of a fixed asset functions by boosting efficiency
    • Recurring expense • One-time investment
    • Reported in the Income Statement
    • Reported in the Balance sheet
    • Ensures that the assets such as
    machinery are functioning optimally • Generates more revenue over time
    at all times • More expensive than revenue
    • Cheaper than Capital Expenditure expenditure
    Both revenue expenditure and capital
    expenditure are equally important!
    It is wrong to say that either is better than the other
    because both are required for your business to operate
    without issues and generate profits. Capital expenditure is
    critical because it can improve business efficiency.
    Revenue expenditure is vital as it ensures smooth business
    operations so there is nothing stopping your business from
    operating fully. Your business must manage and monitor
    both these expenditures to ensure you are not over-
    spending on each. If you do so regularly, you can
    effectively use strategies for regulating these expenses!
    Identify Revenue Expenses as black
    and Capital Expenses as white
    • Purchase a building
    • Rent a building
    • Redecorating existing building
    • Addition to a new building
    • Electricity costs of using the equipment
    • Buy a new vehicle
    • Installation cost of new equipment
    • Repair a vehicle
    Thank you!

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