Here we detail about the difference between capital and revenue expenditure.
1. Capital expenditure is non-recurring in nature.
2. The purpose of incurring capital expenditure is to acquire fixed assets for use in the business enterprise.
3. The benefit of capital expenditure is usually for more than one accounting year.
4. Capital expenditure would lead to increase the earning capacity of the business enterprise.
5. Incurring of capital expenditure would lead to increase in the value of assets. For example, purchase of fixed assets.
6. Capital expenditure is shown in the Balance Sheet on the assets side.
1. Revenue expenditure is recurring in nature.
2. The purpose of incurring revenue expenditure is maintaining the fixed assets in the business enterprise efficiently.
3. The benefit of revenue expenditure is usually for one accounting year.
4. Revenue expenditure maintains the earning capacity of the business enterprise.
5. Incurring of revenue expenditure would lead to decrease in the value of assets. For example, charging depreciation on fixed assets.
6. Revenue expenditure is shown on the debit side of the Trading and Profit & Loss Account.