CAPITAL & REVENUE EXPENDITURE AND RECEIPTS.pptx

PPT FOR THE SUBJECT ACCOUNTING & FINANCIAL MANAGEMENT

1. UNIT - 3 CAPI T AL AN D REVENUE EXPENDI T URE AN D RECE I PTS

2. EXPEN D ITURES : An expenditure is funds used by a business, organization, or corporation to attain new assets, improve existing ones, or reduce a liability. In other words, it’s the use of a resource in the operations of a business.

3. TYPES OF EXPEN D ITURE : C A PI T AL EXPEN DITU R E REVEN UE EXPENDITURE DEF E R R ED RE VEN U E EXPEN DITU R E

4. CAPI T AL E XPE N DITURE MEANING : Capital expenditure is the expenditure which results in acquisition of an asset or which helps to increase in the earning capacity of a business. Example : P urchase of land , b uildi n g , m a c hine r y etc.

5. FE A TURES O F CAPI T AL EXPEN D ITURES : C a pital e xpen d itu r e a r e non - re cur r i n g i n n a tu r e . Capital expenditure is generally made for acquiring fixed assets. C a pital e xpen d itu r e in crea s e s th e v al u e o f fi x e d asse t s . Capital expenditure increases the profit earning capacity of business. Capital expenditure generally involve large amounts of funds .

6. REVENU E E XPE N DITURE MEANING : Revenue expenditure incurred to meet the day to day expenses of the conce r n is called r e v enue e x p endi t u r e. Example : Purchase of goods for resale , salaries , rent etc.

7. FE A TURES O F REVENU E EXPEN D ITURE : Revenue expenditure are related to general operating expenses . Revenue expenditure are related to short period . Revenue expenditure do not add to the value of assets . Revenue expenditure are show at the debit side ( accounting treatment ) of tr ading and profit & loss a c count. Revenue expenditure is that expenses are recurring in nature .

8. DISTINCTION BETWEEN CAPITAL EXPENDITURE AND REVENUE EXPENDITURE Meaning C o s t Expenditure A c c o u n t i ng treatment I n c u r r e n ce of expenditure POI NTS CAP I T AL EXPEND I T U RE E x p e n s es i n c u r r ed i n acqu i r i ng f i x e d assets. I t r e p r es e n t s u n e x p i r ed c o s t . I t i s a n o n - r ec u r r i ng e x p e n d i t u r e . Sh o wn a t th e ass e t s s i de of th e B alan c e She e t . It m ay be i n cu rr ed b e f o r e t h e c o m m e n c e ment of th e b u s i n e s s . REVE NUE EXPEND I T U RE E x p e n s es i n c u r r ed f or mee t i ng e x p e n s e s . I t t e p r es e n t s e x p i r ed c o s t . I t i s a r ec u r r i ng e x p e n d i t u r e . Sh o wn on th e d e b i t s i de of t r ad i ng / p r o f i t & l o s s acc o u n t . b us i n e s s . I t is i n c u rr ed o n l y af t er t he c o m m e n c e ment of

9. DEFERRED R E VEN U E EXPEN D ITURE : Deferred revenue expenditures which are revenue in nature but the benefit of which is likely to accrue to the entity incurring such expenditure are termed as ‘Deferred Revenue Expenditure’. Example : Advertising expenditure , Discount on issue of debentures etc.

10. RECEIPTS : A receipt is a written acknowledgment that something of value has been transferred from one party to another. In addition to the receipts consumers typically receive from vendors and service providers, receipts are also issued in business-to-business dealings as well as stock market transactions.

11. TYPES O F R E CEIPT S : C A PI T AL RECE IPTS REVEN UE REC EIPTS

12. CAPI T AL R E CEIPT S : Capital receipts means contributions into the business by the proprietor, partners or other shareholders towards the capital of the firm and any sum received from debentureholders , any loans and the proceeds of sale of any fixed a s sets of a b u s ine s s enterprise. Example : capital introduced , loan taken etc.

13. FE A TURES O F CAPI T AL RECEIPT S : C a pital r ece ipts a r e no n - re currin g i n n a tu r e . Capital receipts is generally made for acquiring fixed assets. C a pital r ece ipts in crea s e s th e v al u e o f fi x e d a s se t s . Capital receipts increases the profit earning capacity of business. Capital receipts generally involve large amounts of funds . SUM A N R O Y D eptt. O f C omm erce So n apu r Coll e g e Sonapur

14. REVENU E R ECEIPTS : Revenue receipts means the amount realised by sale of goods or rendering of services. Example : i n te r est o n in v est m ent , co m mis si o n etc.

15. FE A TURES O F REVENU E RECEIPTS : Revenue receipts are related to general operating expenses . Revenue receipts are related to short period . R e v enue r ece ipts do no t ad d t o th e v al u e o f as s et s . Revenue receipts are show at the credit side ( accounting treatment ) of tr ading and profit & loss a c count. R e v enue r ece ipts is t h a t e xpen s es a r e re cur r in g i n n a tu re .

16. DISTIN C TION BETWEEN C A PI T AL RECE IPTS & RE VEN U E RECE IPTS POINTS Meaning Substitution N a t u r e A g r ee ment A c c o u n t i ng t re a t ment CAPI T AL REC E I PTS T h e amou n t r ec e i v ed i n t he f o r m of cap i t al i n t r o d u c e d, l oan s t aken and sal e p r o c ee ds of th e f i x e d ass e t s . C ap i t al r ec e i pt i n s u b s t i t u t i on of a s o u r ce of in c o me. T h e i n c om e s a r e non - r ec u r r i n g in nature. It is t h e a m o unt r ece ived f or s u rr e n d e r of ce r t ain r i ght s u n d e r an agreement. C ap i t al r ec e i p t s a r e s h o wn i n t he li ab i li t i es s i de of balan c e s h ee t . RE VEN U E R ECEI PTS T h e a m o n t r ec e i v ed m a i n l y b y se l l i ng of g o o ds and se r v i ce s . R e v e nue r ec e i p t s i n s u b s t i t u t i on of an income. T hes e r ec e i p t s a r e r ec u r r i ng i n nature. I t i s t h e a m o u nt r ec e i v ed ad c o mpe n s a t i on u n d e r an a g r ee ment R e v e nue r ec e i p t s a t e s h o wn i n t he c r e d i t s i de of e i t h e r T r ad i ng acco u nt or P r o f it & Lo s s acco u n t .

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