Capital And Revenue Expenditure And Receipts Chapter 22 Accounts

Front 1

What are expenses categorised into?

Back 1

Expenses are categorised into:

1. Capital expenditure

2. Revenue expenditure

Front 2

What are incomes/Receipts categorised into?

Back 2

Incomes/Receipts can be categorised into:

1. Capital receipt

2. Revenue receipt

Front 3

What is capital expenditure?

Back 3

Capital expenditure is the expenditure incurred in the purchase, acquisition, extension or renovation of a non-current asset, which will be used in the business for a very long period of time and which help to increase the earning capacity of the business.

Front 4

Capital expenditure also includes expenses such as:

1. Legal costs incurred in the Purchase of a non-current asset.

2. Cost of installation of the non-current asset to put the non-current asset in a working condition.

3. Cost incurred in the delivery of the non-current asset.

Back 4

Learn

Front 5

State 5 examples of capital expenditures.

Back 5

Examples of capital expenditures:

1. Purchase of motor vehicles

2. Extension to building

3. Legal costs incurred in the acquisition of land

4. Cost of installing the network system

5. CCTV cameras for surveillance

Front 6

Where are capital expenditure items recorded in the sofp?

Back 6

Capital expenditure items will be recorded in the sofp under the non-current assets section.

Front 7

What is revenue expenditure?

Back 7

Revenue expenditure refers to the expenses incurred during the day-to-day activities of the business in order to keep the business in a state of efficiently. These expenses are recurrent items that is the business will spend money on these items very frequently.

Front 8

Revenue expenditure includes cost such as:

1. Administrative costs

2. Selling costs

3. Distribution costs

4. Costs incurred the maintenance of non-current assets

5. Costs incurred in the purchase of goods for resale.

Back 8

Learn

Front 9

State 6 examples of revenue expenditure.

Back 9

Examples of revenue expenditure:

1. Wages and salaries

2. Electricity bills

3. Stationery

4. Travelling expenses

5. Motor vehicles expenses

6. Legal costs incurred in dept collection

Front 10

Where are revenue expenditure items recorded?

Back 10

Revenue expenditure items are recorded to the income statement either in the trading account section or the profit and loss section.

Front 11

What will happen if a capital expenditure item is treated as a revenue expenditure?

Back 11

If a capital expenditure item is treated as a revenue expenditure, then, Profit for the year will be understated and net assets will br understated.

Front 12

What will happen if a revenue expenditure item is treated as a capital expenditure?

Back 12

If a revenue expenditure item is treated as a capital expenditure item, then, Profit for the year will be overstated and also net assets will be overstated.

Front 13

What is capital receipt/income?

Back 13

A capital receipt refers to the income derived by the sale of a non-current asset which might have become obsolete or is in surplus.

Front 14

Why capital receipt is not recorded in the Income statement?

Back 14

Capital receipt is not recorded in the Income statement because it is not an income derived from the ordinary activities (day-to-day) of the business.

Front 15

How is capital receipt treated?

Back 15

Capital receipt is treated in the disposal account as the disposal value of non-current asset.

Front 16

What happens if there is a profit or loss on disposal (sale) of the non-current asset?

Back 16

If there is a profit or loss on disposal (sale) of the non-current asset, then such :

1. Profit on disposal will be added to Gross Profit in the Income statement

2. Loss on disposal will be added to Gross Loss in the Income statement

Front 17

What is revenue receipt/Income?

Back 17

Revenue receipt refers to the incomes derived from the day-to-day activities of the business.

Front 18

Revenue receipt items include:

1. Income derived from sale of goods sale/revenue.

2. Interest received

3. Commission received

4. Dividend received.

Back 18

Learn

Front 19

Where are revenue (sales)/ revenue is recorded in the Income statement?

Back 19

Revenue (sales)/ revenue is recorded in the trading account section of the Income statement and other items of revenue receipts are added to Gross Profit in the profit and loss account section of the Income statement.

Front 20

What happens if a capital receipt is treated as revenue receipt?

Back 20

If a capital receipt item is treated as a revenue item, then, Profit for the year will be overstated.