Capital & Revenue Expenditure

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
We have just done this topic, but I am struggling to accept what our tutor says. We are being told that: -<BR><BR>* Purchase of Road Fund Licences with vehicles can be classed as either capital or revenue expenditure.<BR><BR>* Purchase of items such as CDs or paper with a computer are to be treated as capital expenditure.<BR><BR>This doesn't have any logic to me.<BR><BR>Is the what everyone else is being taught; we're only a few weeks in and I don't want to be seen as a trouble maker or an idiot so I'm hoping to get some feed back from here first.<BR><BR>

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  • System
    System Posts: 100,534 🤖 Admin 🤖
    Capital & Revenue Expenditure

    The basic rule is revenue = everday stuff that wont last<BR>capital = something that will last more than one year.<BR><BR>road fund licence should be revenue as it is only for 1 year, and same goes for CDs, paper etc for a computer. But the computer itself should last more than one year and therefore is capital expenditure - same goes for cars etc.<BR><BR>Hope this helps.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Capital & Revenue Expenditure

    Thanks Claudia.<BR><BR>This is exactly as I understand it, guess I'll have to question it further with the tutor.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Capital & Revenue Expenditure

    Hi,<BR><BR>I think I can see what your tutor is saying although I don't know if it is right. But if you buy paper or road licences then normally they would go to revenue expenditure. But if they are bought with a computer/car which is capital expenditure then you can include them with the total as capital expenditure rather than splitting them up between the two. There probably isn't a right or wrong answer in this case-so long as you justify your answer.<BR>Sara
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Capital & Revenue Expenditure

    Thanks Sara, I appreciate the input.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Capital & Revenue Expenditure

    Ummm cant understand why your tutor is saying road fund licence should be capitalised....This really is a revenue expense and if your really want to calculate the prepaid element and post to b/s prepayments....<BR>
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Capital & Revenue Expenditure

    I think its something to do with the BRINGING the FIXED assett to its Current Location. IE, you cant buy the car WITHOUT the first years road tax.<BR><BR>If you buy Land you can capitalise the solictors fees. You can capitalise the delivery costs of a office furniure.<BR><BR>Amanda
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Capital & Revenue Expenditure

    Hi Amanda.<BR><BR>I understand about capitalising the costs of bringing the asset in, had never thought as RFL as such a cost but I can see what you are saying. What about such costs as photocopy paper or CDRs. Have you been taught to capitalise these if they are bought with the asset? Appreciate your input
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Capital & Revenue Expenditure

    You may capitalise any costs that brings the asset to it's normal working condition, if you buy a car you cannot drive it until you have taxed it this means that the first years road tax can be capital, subsequent years would be revenue.<BR><BR>I think your tutor is stretching it to say that you can capitalise Cd's unless the CD's are necessary to make the computer work.<BR><BR>Terry <img src="i/expressions/face-icon-small-smile.gif" border="0"><BR><BR>

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