Page 41 - DCOM101_FINANCIAL_ACCOUNTING_I

Unit 4: Capital and Revenue Items

10. Rent, rates and taxes Notes
11. Stationery and printing

12. Postage and Telegrams
13. Entertainment
14. Repairs and renewals
15. Depreciation on fi xed assets
16. Offi ce expenses
17. Bank charges
18. General expenses

19. Travelling expenses
20. Overhauling of second hand machinery purchased
21. Major repairs affected for reconditioning a machinery/the old assets
22. Increasing the seating capacity of a cinema hall
23. Constructing an additional room

24. Carriage for bringing a fixed asset to place of business
25. Shifting business to convenient premises
26. Advertisement on introducing a new product in market
27. Replacement of hand driven machine by automatic machine
28. Research and development
On the basis of items of expenditure, the expenditure can be classified into three categories:

1. Capital Expenditure,
2. Revenue Expenditure, and
3. Deferred Revenue Expenditure.

4.1.1 Capital Expenditure

The expenditure incurred for acquiring a fixed asset or which results in increasing the earning
capacity of the business is known as Capital Expenditure.
The benefits of capital expenditures are generally availed in several accounting years. Following

are some of the examples of Capital Expenditure.
1. Expenditure incurred for the acquisition of a fi xed asset
Example: Building, furniture, machinery etc.
2. Expenditure incurred for the inward carriage or erection of a fi xed asset

Example: (a) Carriage paid in connection with the purchase of fi xed asset;
(b) Wages paid to labourers in connection with the installation of
machinery.

These expenses form part of the cost of the fi xed asset.

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