{"id":82,"date":"2023-01-10T16:33:00","date_gmt":"2023-01-10T16:33:00","guid":{"rendered":""},"modified":"2025-06-30T12:44:28","modified_gmt":"2025-06-30T11:44:28","slug":"capital-vs-revenue-expenditure","status":"publish","type":"post","link":"https:\/\/www.thetrainingplace.org\/blog\/2023\/01\/capital-vs-revenue-expenditure\/","title":{"rendered":"Capital vs revenue expenditure"},"content":{"rendered":"

Capital and Revenue expenses
\nCapital expenditure occurs when a business spends money in purchasing non-current assets for the business operations or when it spends money in adding value or improving an existing non-current asset. This will include delivery and legal costs in acquiring the non-current assets.<\/p>\n

Non-current assets are items owned by the business which have some longevity and will be used for a long period of time within the business. These are commonly known as fixed assets. Examples of these include buildings, machinery, furniture, motor vehicles etc.<\/p>\n

When a business buys a new machine, this is classified as a capital expenditure and is accounted for in the statement of financial position over a few years, because of the longevity of the use of the machinery in the business.<\/p>\n

Revenue expenditure are all other expenditure outside capital expenditure incurred by a business in carrying out its daily operations. Such expenditure will include costs incurred in the acquisition of current assets acquired for conversion into cash; costs incurred in purchasing and selling of goods; day-to-day administration or operating costs; and costs incurred in maintaining the revenue-earning capacity of the non-current assets.<\/p>\n

All such expenditure is charged to the statement of profit or loss, because such expenditure are usually used up within a short period of time and don’t add value to any existing non-current assets.<\/p>\n

The differences between capital and revenue expenditure can be illustrated using a motor vehicle:<\/p>\n

Expenditure\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 Type of expenditure<\/p>\n

Cost of the motor vehicle\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 Capital<\/p>\n

Petrol for the vehicle\u00a0\u00a0 \u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0 Revenue<\/p>\n

Repairs to the vehicle\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0Revenue<\/p>\n

Headlights for the vehicle\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0Capital<\/p>\n

Servicing the vehicle\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0Revenue<\/p>\n

Body work & spraying the vehicle\u00a0 \u00a0 \u00a0Capital<\/p>\n

Foot mats for the vehicle\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 Revenue<\/p>\n\n\n

AAT Level 3 | The Training Place<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Capital and Revenue expenses Capital expenditure occurs when a business spends money in purchasing non-current assets for the business operations or when it spends money in adding value or improving an existing non-current asset. This will include delivery and legal costs in acquiring the non-current assets. 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