Difference between Capital Expenditure and Revenue Expenditure Capital Expenditure Revenue Expenditure Acquisition, extension, modification of fixed asset €.g. purchase of a plant, modification of machinery. These expenditures increase the earning capacity of the business e.g purchases of new, modern machine would increase the speed, accuracy of performance. Day to day activities of business. E.g Administrative, maintenance expenditure. These expenditures maintain the earning capacity of business, expenses on regular maintenance would help to avoid stoppage in performance 4) Add value to existing asset Expenditure is not capital in nature only because the amount involved is quite huge. This type of expenditure adds value to an existing asset, when modification, extension to existing asset is done. Expenditure is not revenue in nature only because the amount involved is small. This type of expenditure does not add any value to an existing asset Benefits more than one accounting period or several periods Recorded in Balance Sheet subject to depreciation. Normally benefits one accounting period. Recorded in Income Statement subject to prepaid and outstanding expenses.Difference between Capital Expenditure and Deferred Revenue Expenditure Capital Expenditure Deferred Revenue Expenditure Acquisition, extension, modification of fixed asset €.g. purchase of a plant, modification of machinery. An item the benefits of which would be derived for 2 to 5 years in near future, An abnormal expense like loss by fire and the amount is huge that cannot be justifiably accounted in a single period. An expense which provide part benefit in current period and part in next period. 2)Effect on | These expenditures No effect on earning capaci Earning increase the earning some of these expenditures may help Capacity | capacity of the business in maintaining the capacity as like €.g. purchases of new, revenue expenditures. modern machine would increase the speed, accuracy of performance 3) Not Expenditure is not capital | Recognition is also based on the recognized | in nature only because the | amount spent e.g. loss by fire if it is ‘on the amount involved is quite _ | small to be treated as revenue and basis of huge. written of during the period but if amount heavy then deferred over a period of spent time. 4) Add ‘This type of expenditure _| Does not add value to an existing value to adds value to an existing —_| asset existing asset, when modification, asset extension to existing asset is done. 5) Benefit | Benefits more than one Benefits may be derived for more derived accounting period or than one accounting period, but for several periods. near future. 6) Where | Recorded in Balance Sheet | The part of the amount to be written recorded | subject to depreciation off during current period is recordet in Income Statement and the rest (_ the amount is recorded in Balanc: SheetGeneral Inseran The element of risk is the Risk damage’ loss to a property death of a person | —= or an asset. Comparatively shorter period not —extendit Tenure Long Period sine beyond the useful life of the asset In the event of death of | The beneficiary would the Insured _—the | generally be the Insured Beneficiary Beneficiary would be the | who would also be, in Legal Heirs of the | most cases, the owner of Insured. the asset Periodical ments | Generally Lump Si Payment of Paw » nn which could be quarterly, | Payment at the time of Premium half yearly oxyeorty taking up the Policy. Bonded Warehouse & Duty paid warehouse Points of Distinction Bonded Warehouse Duty Paid Warehouse Meaning Bonded Warehouse is the warehouse where imported goods on which duty is not paid are stored. Duty paid Warehouse is the warehouse where imported goods on which duty is already paid is stored. They are located within the dock area. They are located in port-town outside the dock area. The imported goods stored here are mostly re-exported. The imported goods stored here are mostly for the domestic markets. Supervision The customs authority closely supervises the working, of these warehouses. These warchouses are not supervised by the customs authority. They are supervised by port authority. Delivery Delivery of goods is done after payment of Import duty. In case of re-export, the import duty need not be paid, only rent and service charges need to be paid. Delivery of goods can be obtained after payment of the rent charges of the warehouse. Main purpose would be either the importer needs to re-export the goods or the importer may not be in a position to pay import duty. Main purpose would be that the importer does not have suitable warehousing facility. Also, he many not require immediate delivery of goods. Ownership ‘Such warehouses may be owned by private or dock authorities. ‘Such warehouses are owned by public autho:Advertising Sales Promotion (i) A reason is offered to buy. An incentive is offered to buy. (ii) Theme is to build up brand loy- | Theme is to break down the loy- alty to a competing brand. - , Aim is to attract not only con- (iii) Aim is to attract the ultimate Consumers. sumers but retailers, wholesales and Sales force also. (iv) Effective in the long run. Effective in the short run, (v) Heavy advertising makes the] Heavy Sales promotion leads to brand image of the product and|the product being perceived as accords it the perception of higher| having a brand image of cheaper quality and lower quality product. Various types of incentives are of- fered for (vii) Advertising includes m e s - 3 . . Consumer promotion sages delivered through : ; Trade Promotion various types of Media. Sales force PromotionA budget gives you an overview ofthe planned business revenue and expenses over a spectied time, The budgets re created annually by Financial Year, The budgets considerably more static than financial forecasting, With the help of budgeting, you set a target for your business cost or expense, Focuses more on your company’s fixed target that a company wants to achieve, Budgeting i a tactical tool, assist you in business operation management Forecasting is a well-thought-out projection of business results fora future span, Financial forecasting is prepared for both the short-term and long-term, Financial forecasting experiences ots of adjustments based on the situation and economic condition of the business, With the financial forecasting, you will set up any targets Forecasting is just an estimation where a company may or may not achieve Itis ctype of strategic tool and helps you more to estimate the company’s future performance