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June 15, 2007

What is a capital expenditure versus a revenue expenditure?

A capital expenditure is an amount spent to acquire or improve a long-term asset such as equipment or buildings. Usually the cost is recorded in an account classified as Property, Plant and Equipment. The cost (except for the cost of land) will then be charged to depreciation expense over the useful life of the asset.

A revenue expenditure is an amount that is expensed immediately—thereby being matched with revenues of the current accounting period. Routine repairs are revenue expenditures because they are charged directly to an account such as Repairs and Maintenance Expense. Even significant repairs that do not extend the life of the asset or do not improve the asset (the repairs merely return the asset back to its previous condition) are revenue expenditures.

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22 Responses to “What is a capital expenditure versus a revenue expenditure?”

  1. Tuti on March 24th, 2009 7:10 am

    How do I record roof (building-top) renovation? Is it an asset or an expense?

  2. ibn on April 9th, 2009 3:07 pm

    It should be in repairs/renovation account ( debit side) as it is an expense.

  3. Madhava Chary V on May 6th, 2009 12:03 pm

    Can you list out the items comes under Capital / Revenue

  4. Asad Aslam on May 7th, 2009 9:55 pm

    Renovation is defined as the state of being restored to its former good condition. So we may assume that the roof already had some building top which is now being renovated.

    It is basically done to restore the asset (building )in good condition so as to maintain its efficiency, so it must be a Revenue Expenditure.

  5. tammy on May 16th, 2009 6:08 pm

    How do I record security door for my company? it over $6,0000.

  6. shahin on June 1st, 2009 7:17 am

    explain the purpose of trial balance

  7. zameer on June 28th, 2009 4:57 am

    what is the difference between expense and expenditure?

  8. wanda on July 13th, 2009 6:49 pm

    Does a capital expenditure debit an expense, capital , liability or asset account?

  9. dilip on July 21st, 2009 4:01 am

    revenu & capital a/c

  10. mildred on July 21st, 2009 5:51 am

    nice.it has assisted me.
    thank you

  11. aishath on July 23rd, 2009 3:08 am

    better to have exercises related to this topic

  12. halima on July 29th, 2009 4:22 am

    this is amazing!it has really assisted me.
    thanks.

  13. anand on August 21st, 2009 12:03 am

    hi i am anand i want the news letter

  14. nosheen on September 4th, 2009 7:35 am

    capital expenditure refers to the acquisition of fixed or non current assets and added to the non current asset account in the balance sheet.however, revenue expenditure are expenses which incurred to improve the efficiency of assets and hence charged to the income statement of the year in which they occur….

  15. confused on September 18th, 2009 9:50 pm

    how should i record a capital expenditure? which account that it involved?

  16. chief xcel on October 8th, 2009 8:12 am

    what are the features of capital and revenue expenditure?

  17. sue on October 14th, 2009 11:47 am

    how should i record a capital expenditure? which account that it involved?

  18. jaxon12 on October 20th, 2009 3:05 am

    not !satisfactory

  19. salman on October 20th, 2009 4:01 pm

    Revenue expense are costs in the for day to day running of the business for example servicing a machine, spare parts etc. Revenue expenditure is normally charged against profit in the Income statement in the year it is expensed.

    Capital expenditure is on an item that will help generate profits over the longer term (12 months or more) so a purchase of a machine or van etc. The item is depreciated over the items useful life and each depreciateable amount is charged to the Income statement in the year the item has help generate profit.

    if u buy machine that is capital but if u buy it spare parts to run it it is revenue expenditure

  20. salman on October 20th, 2009 4:02 pm

    Revenue expense are costs in the for day to day running of the business for example servicing a machine, spare parts etc. Revenue expenditure is normally charged against profit in the Income statement in the year it is expensed.

    Capital expenditure is on an item that will help generate profits over the longer term (12 months or more) so a purchase of a machine or van etc. The item is depreciated over the items useful life and each depreciateable amount is charged to the Income statement in the year the item has help generate profit.

    if u buy machine that is capital but if u buy it spare parts to run it it is revenue expenditure

    salmancma@hotmail.com

  21. Ganesh Londhe on October 31st, 2009 12:34 am

    what is deference between capital & revenue expenses?

  22. ravi on November 4th, 2009 7:18 am

    what is the capital expences

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