July 28,2021 - Wednesday

The occurrence of expenditure during the course of business is very natural.

Generally, expenditure is incurred to increase the efficiency of business and further
returns. These are broadly classified into two categories, i.e. capital expenditure
and revenue expenditure.

Capital Expenditure is an expense made to acquire an asset or improve the

capacity of the asset. Conversely, revenue expenditure implies the routine
expenditure, that is incurred in the day to day business activities.
Revenue Expenditure
1. Capital expenditure generates future economic benefits, but the
Revenue expenditure generates benefit for the current year only.
2. The major difference between the two is that the Capital
expenditure is a one-time investment of money. On the contrary,
revenue expenditure occurs frequently.
3. Capital expenditure is shown in the Balance Sheet, in asset side,
and in the Income Statement (depreciation), but Revenue
Expenditure is shown only in the Income Statement.
4. Capital Expenditure is capitalized as opposed to Revenue
Expenditure, which is not capitalized.
5. Capital Expenditure is a long-term expenditure. Conversely,
Revenue Expenditure is a short-term expenditure.
6. Capital Expenditure attempts to improve the earning capacity of
the entity. On the contrary, revenue expenditure aims at
maintaining the earning capacity of the company.
7. Capital expenditure is not matched with the capital receipts. Unlike
revenue expenditure, which is matched with the revenue receipts.

Statement of profit and loss

1. Format is given by companies act 2013 (scheduled bill)

2. Balance sheet as on 31st march 2020
3. Statement of profit and loss for the year ended 31st march 2020
Income>expenses = Profit
Income<expense = Loss
Revenue>cost = profit
Revenue<cost = profit