Difference Between Capital Expenditure And Revenue Expenditure
The main dissimilarities or difference between capital expenditure and revenue expenditure can be pointed out as follows:
The main dissimilarities or difference between capital expenditure and revenue expenditure can be pointed out as follows:
1. Meaning
Capital Expenditure: It is an amount spent for acquiring or improving the capacity of capital or permanent assets.
Revenue Expenditure: It is an amount spent for day to day activities of the business.
2. Nature
Capital Expenditure: It is one time investment. So, it is non-recurring in nature.
Revenue Expenditure: It occurs regularly. So, it is recurring in nature.
3. Benefit
Capital Expenditure: Provides benefit for several years.
Revenue Expenditure: It provides benefit only for one accounting period.
4. Size Of Investment
Capital Expenditure: It requires large amount of capital.
Revenue Expenditure: It requires less amount of money for regular business activities.
5. Purpose
Capital Expenditure: To improve the working capacity of permanent assets to increase earnings of the business.
Revenue Expenditure: To maintain the earning capacity of the business.
Also Read:
Also Read:
6. Accounting Treatment
Capital Expenditure: It is recorded or included in the assets side of balance sheet.
Revenue Expenditure: It is included in the debit side of trading account and profit and loss account.
Capital Expenditure Vs Revenue Expenditure (Comparison Chart)
I hope this post is helpful to understand the difference between capital expenditure and revenue expenditure and to make comparison between them.
Capital Expenditure Vs Revenue Expenditure (Comparison Chart)
Basis For Difference
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Capital Expenditure
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Revenue Expenditure
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Introduction
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Amount of money spent by a firm to acquire or to improve the capacity of fixed asset
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Amount spent by a firm for day to day business activities
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Nature
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Irregular
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Regular
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Benefits
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Long-term
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Short-term
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Investment Size
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Large
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Small
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Purpose/Objective
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To improve the capacity of asset
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To maintain the earning capacity
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Included in the asset side of balance sheet
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Recorded in the debit side of trading and profit and loss account
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I hope this post is helpful to understand the difference between capital expenditure and revenue expenditure and to make comparison between them.
