CAPITAL &

REVENUE
EXPENDITURE

2024-05-30 1
 CAPITAL
EXPENDITURE
Capital Expenditure is
incurred when a business
spends money either to:
BUY NON-CURRENT ASSETS
OR
ADD TO THE VALUE OF THE
EXISTING NON-CURRENT
ASSETS
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 CAPITAL
EXPENDITURE
These include amounts spent on:
1. Acquiring non-current assets
2. Bringing them into the business
3. Legal costs of buying a non-current
asset, say, buildings
4. Carriage cost on non-current asset
bought (say machinery)
5. Any other cost needed to get a non-
current asset ready for use

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 REVENUE
EXPENDITURE
These are expenditures
which are not spent on
increasing the value of non-
current assets, but are
incurred in running the
business on a day-to-day
basis.
They RECUR very frequently.
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 Summary
If expenditure is directly incurred in buying
and bringing a non-current asset into use for
the first time, it is Capital Expenditure
If expenditure improves non-current asset
(by making it superior to what it was when
it was first owned by the business e.g.
building an extension to a warehouse) it is
capital expenditure
All other expenditures are revenue
expenditures.

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 EXAMPLES
Expenditure Type of Expenditure
Buying a Motor Van Capital
Petrol cost for the Van Revenue
Repairs to Van Revenue
Putting extra headlights on Van Capital
Buying machinery Capital
Electricity costs of using the machinery Revenue

Spent P2000 on machinery; P1 500 for an item Capital P 1 500

(improvement) added to the machinery and P500 Revenue P500
for repairs
Painting outside of a new building Capital

Two years later repainted the above mentioned Revenue

building

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 CAPITAL & REVENUE EXPENDITURE
 Purchase of an extra Van
 Capital
 Cost of rebuilding warehouse
wall which had fallen down
 Revenue
 Building extension to the
warehouse
 Capital
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 CAPITAL & REVENUE EXPENDITURE
 Painting extension to warehouse when
it is first built
 Capital
 Repainting extension to warehouse
three years later than that was done
above
 Revenue
 Carriage cost on bricks for new
warehouse extension
 Capital
May 30, 2024Capital 8
 CAPITAL & REVENUE EXPENDITURE
 Inventory distributed as free samples
 Revenue
 Carriage cost on purchases
 Revenue
 Carriage cost on sales
 Revenue
 Legal costs of collecting debts
 Revenue
 Legal charges on purchase of land for the
business
May 30, Capital
 2024 9
 CAPITAL & REVENUE EXPENDITURE
 Fire Insurance premium
 Revenue
 Costs of erecting new machine
 Capital
 Purchase of machinery for use in the
business
 Capital
 Carriage paid to bring the machinery (above)
to the factory
 Capital
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 CAPITAL & REVENUE EXPENDITURE
 Heating and lighting expenses
 Revenue
 Purchase of soft drinks vending machine
 Capital
 Cost of building extension to the factory
 Capital
 Purchase of extra filing cabinets for sales
office
 Capital

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 CAPITAL & REVENUE EXPENDITURE
 Cost of repairs to office equipment
 Revenue
 Legal fees paid in connection with
factory extension
 Capital
 The cost of installing a new
machine
 Capital
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 CAPITAL & REVENUE EXPENDITURE
 Cost of hiring refrigeration plant in
a butcher’s shop
 Revenue
 A Truck bought for resale by a
Truck dealer
 Revenue
 Cost of motor tax for a new Truck
 Capital
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 CAPITAL & REVENUE EXPENDITURE
 Cost of motor tax for an existing
van
 Revenue
 Repairs and maintenance of
existing van
 Revenue

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