Capital and revenue expenditure

rachy1975

i know capital expenditure is fixed assets and delivery, instalation etc and revenue expenditure is day to day running costs but ive forgotton a few things...if you re decorate the office is this revenue expenditure if it doesnt need doin?? but if you add an extention on to your building this is improving it so capital expenditure...just realised this is an area i forgot to revise......:huh:

mikes

You are right on your explinations. Decoration is revenue expenditure as it is improving on an existing asset and Building an extenstion is classed as capital as it is an improvement on the original building. However doing repairs to an existing building is revenue.

Other points in this are; if you are buying property, then the full costs including legal costs are all capital, as they relate to the purchase of the fixed asset.

If the firms own staff are used to install air conditioning then the cost of the asset and their wages are all capital and the wages account will need to be reduced to reflect this.

Capital expenditure is shown in the balance sheet and revenue is shown as an overhead in the P&L A/C.

rachy1975

mikes wrote: »

You are right on your explinations. Decoration is revenue expenditure as it is improving on an existing asset and Building an extenstion is classed as capital as it is an improvement on the original building. However doing repairs to an existing building is revenue.

Other points in this are; if you are buying property, then the full costs including legal costs are all capital, as they relate to the purchase of the fixed asset.

If the firms own staff are used to install air conditioning then the cost of the asset and their wages are all capital and the wages account will need to be reduced to reflect this.

Capital expenditure is shown in the balance sheet and revenue is shown as an overhead in the P&L A/C.

thank you...i hope this doesnt come up tomor...one of my weak points...