1. What is revenue Expenditure?

What are the basic features(characteristics)

of revenue expenditure? explain
Revenue expenditure refers to the expenses incurred by a business in its day-to-day operations
to generate revenue. These expenses are usually recurring and are incurred to maintain the
normal functioning of the business. Some examples of revenue expenditure include salaries and
wages, rent, utilities, office supplies, and advertising.
The basic features or characteristics of revenue expenditure are:
1. It is a recurring expense: Revenue expenditure is incurred regularly to maintain the normal
operations of the business.
2. It is not capitalized: Revenue expenditure is not capitalized as it does not result in the
acquisition of an asset that can be used over a long period.
3. It is charged to the income statement: Revenue expenditure is charged to the income
statement as an expense in the period in which it is incurred.
4. It does not increase the earning capacity of the business: Revenue expenditure is not aimed
at increasing the earning capacity of the business but to maintain its current level of operations.
In summary, revenue expenditure refers to the expenses incurred by a business in its day-to-
day operations, which are recurring in nature, not capitalized, charged to the income
statement, and do not increase the earning capacity of the business.

2. What is capital expenditure? Clearly discuss the fundamental

characteristics of capital expenditure
Capital expenditure refers to the expenses incurred by a business to acquire or improve a long-
term asset that is expected to provide benefits beyond the current accounting period. These
expenses are not recurring in nature and are aimed at increasing the earning capacity of the
business. Some examples of capital expenditure include the purchase of property, plant, and
equipment, research and development, and the acquisition of intangible assets such as patents
and trademarks.
The fundamental characteristics of capital expenditure are:
1. It is not a recurring expense: Capital expenditure is not a regular expense, but rather an
investment in a long-term asset that will provide benefits beyond the current accounting
period.
2. It is capitalized: Capital expenditure is capitalized as it results in the acquisition or
improvement of an asset that can be used over a long period.
3. It is charged to the balance sheet: Capital expenditure is charged to the balance sheet as an
asset and is depreciated over its useful life.
4. It increases the earning capacity of the business: Capital expenditure is aimed at increasing
the earning capacity of the business by improving its operations or acquiring new assets.
In summary, capital expenditure refers to the expenses incurred by a business to acquire or
improve a long-term asset that will provide benefits beyond the current accounting period. It is
not a recurring expense, is capitalized, charged to the balance sheet, and aimed at increasing
the earning capacity of the business.

3. What are the basic differences between revenue expenditure and capital
expenditure?
The basic differences between revenue expenditure and capital expenditure are as follows:
1. Nature of expense: Revenue expenditure refers to the expenses incurred by a business in its
day-to-day operations to generate revenue, while capital expenditure refers to the expenses
incurred to acquire or improve a long-term asset that will provide benefits beyond the current
accounting period.
2. Recurring vs. non-recurring: Revenue expenditure is a recurring expense that is incurred
regularly to maintain the normal operations of the business, while capital expenditure is a non-
recurring expense that is incurred as an investment in a long-term asset.
3. Capitalization: Revenue expenditure is not capitalized as it does not result in the acquisition
or improvement of an asset that can be used over a long period, while capital expenditure is
capitalized as it results in the acquisition or improvement of an asset that can be used over a
long period.
4. Income statement vs. balance sheet: Revenue expenditure is charged to the income
statement as an expense in the period in which it is incurred, while capital expenditure is
charged to the balance sheet as an asset and is depreciated over its useful life.
5. Earning capacity: Revenue expenditure is not aimed at increasing the earning capacity of the
business but to maintain its current level of operations, while capital expenditure is aimed at
increasing the earning capacity of the business by improving its operations or acquiring new
assets.
In summary, revenue expenditure and capital expenditure differ in terms of nature of expense,
recurring vs. non-recurring, capitalization, income statement vs. balance sheet, and earning
capacity.