SUMAN ROY

Deptt. Of Commerce
Sonapur College
Sonapur

UNIT -3

CAPITAL AND REVENUE EXPENDITURE AND RECEIPTS

 SUMAN ROY
Deptt. Of Commerce
Sonapur College
Sonapur

EXPENDITURES :

An expenditure is funds used by a business, organization, or

corporation to attain new assets, improve existing ones, or reduce
a liability. In other words, it’s the use of a resource in the
operations of a business.
 SUMAN ROY
Deptt. Of Commerce
Sonapur College
Sonapur

TYPES OF EXPENDITURE :

• CAPITAL EXPENDITURE
• REVENUE EXPENDITURE
• DEFERRED REVENUE EXPENDITURE
 SUMAN ROY
Deptt. Of Commerce
Sonapur College
Sonapur

CAPITAL EXPENDITURE MEANING :

Capital expenditure is the expenditure which results in acquisition of an

asset or which helps to increase in the earning capacity of a business.

Example : Purchase of land , building , machinery etc.

 SUMAN ROY
Deptt. Of Commerce
Sonapur College
Sonapur

FEATURES OF CAPITAL EXPENDITURES :

• Capital expenditure are non-recurring in nature.

• Capital expenditure is generally made for acquiring fixed assets.
• Capital expenditure increases the value of fixed assets.
• Capital expenditure increases the profit earning capacity of business.
• Capital expenditure generally involve large amounts of funds.
 SUMAN ROY
Deptt. Of Commerce
Sonapur College
Sonapur

REVENUE EXPENDITURE MEANING :

Revenue expenditure incurred to meet the day to day expenses of the

concern is called revenue expenditure.

Example : Purchase of goods for resale , salaries , rent etc.

 SUMAN ROY
Deptt. Of Commerce
FEATURES OF REVENUE EXPENDITURE : Sonapur College
Sonapur

• Revenue expenditure are related to general operating expenses.

• Revenue expenditure are related to short period.
• Revenue expenditure do not add to the value of assets.
• Revenue expenditure are show at the debit side (accounting treatment) of
trading and profit & loss account.
• Revenue expenditure is that expenses are recurring in nature.
DISTINCTION BETWEEN CAPITAL EXPENDITURE AND REVENUE EXPENDITURE
POINTS CAPITAL EXPENDITURE REVENUE EXPENDITURE

Meaning Expenses incurred in acquiring fixed Expenses incurred for meeting expenses.
assets.

It represents unexpired cost.

Cost It tepresents expired cost.

It is a non-recurring expenditure.
Expenditure It is a recurring expenditure.

Shown at the assets side of the

Accounting Shown on the debit side of trading/profit &
Balance Sheet.
treatment loss account.

It may be incurred before the

Incurrence of It is incurred only after the commencement of
commencement of the business.
expenditure business.
SUMAN ROY
Dept. Of Commerce
Sonapur College
Sonapur
 SUMAN ROY
Deptt. Of Commerce

DEFERRED REVENUE EXPENDITURE : Sonapur College

Sonapur

Deferred revenue expenditures which are revenue in nature but the benefit
of which is likely to accrue to the entity incurring such expenditure are
termed as ‘Deferred Revenue Expenditure’.
Example : Advertising expenditure , Discount on issue of debentures etc.
 SUMAN ROY
Deptt. Of Commerce
Sonapur College
Sonapur

RECEIPTS :

A receipt is a written acknowledgment that something of value has

been transferred from one party to another. In addition to the
receipts consumers typically receive from vendors and service
providers, receipts are also issued in business-to-business
dealings as well as stock market transactions.
 SUMAN ROY
Deptt. Of Commerce
Sonapur College
Sonapur

TYPES OF RECEIPTS :

CAPITAL RECEIPTS
REVENUE RECEIPTS
 SUMAN ROY
Deptt. Of Commerce

CAPITAL RECEIPTS : Sonapur College

Sonapur

Capital receipts means contributions into the business by the proprietor,

partners or other shareholders towards the capital of the firm and any sum
received from debentureholders , any loans and the proceeds of sale of any
fixed assets of a business enterprise.

Example : capital introduced , loan taken etc.

 SUMAN ROY
Deptt. Of Commerce
Sonapur College
Sonapur

FEATURES OF CAPITAL RECEIPTS :

• Capital receipts are non-recurring in nature.

• Capital receipts is generally made for acquiring fixed assets.
• Capital receipts increases the value of fixed assets.
• Capital receipts increases the profit earning capacity of business.
• Capital receipts generally involve large amounts of funds.
 SUMAN ROY
Deptt. Of Commerce
Sonapur College
Sonapur

REVENUE RECEIPTS :

Revenue receipts means the amount realised by sale of goods or rendering

of services.
Example : interest on investment , commission etc.
 SUMAN ROY
Deptt. Of Commerce
Sonapur College
Sonapur

FEATURES OF REVENUE RECEIPTS :

• Revenue receipts are related to general operating expenses.

• Revenue receipts are related to short period.
• Revenue receipts do not add to the value of assets.
• Revenue receipts are show at the credit side (accounting treatment) of
trading and profit & loss account.
• Revenue receipts is that expenses are recurring in nature.
 DISTINCTION BETWEEN CAPITAL RECEIPTS & REVENUE RECEIPTS
CAPITAL RECEIPTS REVENUE RECEIPTS
POINTS
Meaning The amount received in the form of The amont received mainly by
capital introduced, loans taken and selling of goods and services.
sale proceeds of the fixed assets.

Capital receipt in substitution of a Revenue receipts in substitution of

Substitution source of income. an income.

The incomes are non-recurring in These receipts are recurring in

Nature nature. nature.

It is the amount received for It is the amount received ad

Agreement surrender of certain rights under an compensation under an agreement
agreement. .

Accounting treatment Capital receipts are shown in the Revenue receipts ate shown in the
liabilities side of balance sheet. credit side of either Trading
account or Prpfit & Loss account.

SUMAN ROY
Dept. Of Commerce
Sonapur College
Sonapur
 THANK YOU

SUMAN ROY
DEPARTMENT OF COMMERCE (ACCOUNTANCY)
SONAPUR COLLEGE
SONAPUR
PH : 97067-67674