Form 3 Book Keeping – CAPITAL AND REVENUE EXPENDITURE

CAPITAL EXPENDITURE

Is made when a firm spends money either to buy fixed asset or to add the value of existing fixed
asset with a useful life extending beyond the year.

2)     Add the value of an existing fixed assets included in such amounts should be those spent on

a)     Acquiring fixed assets

b)     Bringing them into firms

c)     Legal cost of buying buildings

d)     Carriage inward on machinery brought

e)     Any other cost needed to get the fixed assets ready for use

REVENUE EXPENDITURE

-Expenses needed for the day to day running of the business

Example

Classify the following between revenue and capital expenditure

 EXERCISE

For the following of J charks whole sale classify the following between capital and the revenue expenditure

• a)     Purchases of an extra  motor van-       
• b)     Cost of a building ware house which had fallen down –
• c)    Build extension to the ware house – 
• d)     Painting extension to ware house when it is first built –
• e)     Repaint extension to ware house three years later than done it  
• f)      Carriage on cost on purchases –
• g)     Carriage costs on sales –
• h)     Carriage cost on bricks for new ware house extension – 
• i)       Legal cost of collecting debts –
• j)       Legal charges on acquiring new premises for office –
• k)     Find insurance premium –
• l)       Cost of existing new machine-  

  Answers:
  a) Capital expenditure
  b) Capital expenditure

•      c) Capital expenditure
•      d)Capital expenditure
  e) Revenue expenditure
•       f) Capital expenditure
•       g) Revenue expenditure
•       h) Capital expenditure
•       i) Revenue expenditure
•       j) Capital expenditure
•       k) Capital expenditure
•       l) Revenue expenditure

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