Page 40 - DCOM101_FINANCIAL_ACCOUNTING_I

Financial Accounting-I Sukhpreet Kaur, Lovely Professional University

Notes Unit 4: Capital and Revenue Items

CONTENTS

Objectives
Introduction
4.1 Capital and Revenue Expenditures
4.1.1 Capital Expenditure
4.1.2 Capital and Revenue Receipts

4.2 Summary
4.3 Keywords
4.4 Self Assessment
4.5 Review Questions

4.6 Further Readings
Objectives

After studying this unit, you will be able to:

z Define capital and revenue expenditure
z Identify capital and revenue receipts

Introduction

A businessman is interested to know the net result of his business operations after a certain period.
But neither the trial balance nor the books of accounts reveal the net results of the business. For
this, the financial statements are prepared. But before you learn how to prepare these statements,

it is all the more necessary to know about the nature of expenditure and receipts i.e. capital and
revenue. This will help in recording correctly the items in these statements.

4.1 Capital and Revenue Expenditures

In business, there are thousands of items of expenditure. The following are some of these
expenditures which are generally incurred in all types of business:
1. Purchase of goods

2. Purchase of fixed assets such as Building, Furniture, Machine, etc.
3. ‘Carriage inwards’
4. Octroi

5. Purchase of Raw Material
6. Import duty
7. Coal, gas, water, oil, grease, fuel, heating and lighting
8. Wages paid to workers for installation of machinery
9. Salaries

34 LOVELY PROFESSIONAL UNIVERSITY