Capital & Revenue Expenditure (Edexcel IGCSE Accounting)
Revision Note
Written by: Dan Finlay
Reviewed by: Lucy Kirkham
Capital Expenditure
What is capital expenditure?
Capital expenditure is money that is spent on non-current assets for the long-term benefit of the business
Capital expenditure includes:
The purchase of non-current assets
The delivery of non-current assets
The installation of non-current assets
The legal costs incurred with the non-current asset purchases
The decoration of new non-current assets
The extension of non-current assets
e.g. increasing the size of a storage warehouse
Capital expenditure is included in the statement of financial position under the non-current assets section
It is not included in the income statement
Revenue Expenditure
What is revenue expenditure?
Revenue expenditure is money that is spent on the day-to-day running costs of the business
Revenue expenditure includes:
The purchase of goods for resale
General expenses
Insurance
Training costs
Wages
Repairs of non-current assets
Redecoration of existing non-current assets
Revenue expenditure is included in the income statement
It is not included in the statement of financial position
However, it will contribute to the profit or loss for the year, which is recorded in the statement of financial position
Worked Example
Ajax buys a new vehicle. The following table shows the payments Ajax has made.
$ | |
Cost of the vehicle | 27 500 |
Delivery cost of the vehicle | 300 |
Insurance | 800 |
Fuel costs | 400 |
How much is the capital expenditure?
Answer
Identify whether each cost contributes to revenue expenditure or capital expenditure.
Type of expenditure | |
Cost of the vehicle | Capital |
Delivery cost of the vehicle | Capital |
Insurance | Revenue |
Fuel costs | Revenue |
Add together the costs that contribute to capital expenditure.
$27 500 + $300 = $27 800
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