YEAR 11 ACCOUNTING CAPITAL EXPENDITURE REVENUE EXPENDITURE EXPENDITURE

YEAR 11 ACCOUNTING CAPITAL EXPENDITURE REVENUE EXPENDITURE

EXPENDITURE There are TWO kinds of expenditure: n n Capital Expenditure Revenue Expenditure

CAPITAL EXPENDITURE Capital Expenditure that creates an asset or improves an asset. Does extra spending in Asset affect Owner’s Equity NO, Capital Expenditure does NOT affect Owner’s Equity

Capital Expenditure cont’d Capital Expenditure includes: n n Purchase of a property, plant and equipment (for example: buying a new computer) Improvements to assets to increase its performance or extend its useful life (for example: installing extra RAM to increase its performance)

Capital Expenditure cont’d The cost of capital expenditure includes: n n n Cost of Fixed Asset Delivery Cost from the suppliers to the business Insurance while transit Installation cost – including labour Materials in trial runs Any other costs that get the asset into performance state.

REVENUE EXPENDITURE Revenue Expenditure is any expenditure that: n Occurs for day-to-day operation. n Has a recurring nature (happens more than once). n Helps the entity to earn income from its assets (for example, spending on petrol helps to move the delivery vehicle). n Reduces EQUITY.

Example For a courier business Purchase of a delivery vehicle Capital Expenditure Sign printed on delivery vehicle Revenue Expenditure Cost of installing new engine in the vehicle Capital Expenditure Petrol Revenue Expenditure

Another Example For a hairdresser business Insurance of transiting new computer Capital Expenditure Wages paid to hairdressers Revenue Expenditure Repairs to Equipment Install a piece of computer chip that fastens the cutting process Revenue Expenditure Capital Expenditure