An
expenditure which results in the acquisition of
permanent asset which is intended lo be
permanently used in the business for the purpose
of earning revenue, is known as capital
expenditure. These expenditures are
'non-recurring' by nature.
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All the
expenditures which are incurred in the day to
day conduct and administration of a business and
the effect-of which is completely exhausted
within the current accounting year are known as
"revenue expenditures".
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There are some items
of expenditure which are revenue by nature, yet they
are not regarded as revenue expenditure. Such
expenditures may be divided into two groups. These
are Deferred revenue expenditures and capitalized
revenue expenditures.
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We have no hard
and fast rule for distinguishing capital
expenditure from revenue expenditure because,
the same item of expenditure may be treated as
capital, revenue or deferred revenue depending
upon the circumstances.
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When
the business receives money it is again of two
sorts. It my be a long-term receipt, a
contribution by the owner, either to start the
business off or to increase the funds available
to it. It might be a mortgage or an which brings
money into the business for a long-term, but in
this case it is not the owner of the business
but some other investor who is supplying the
money.
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Capital
profit is a profit which is earned, on the sale
of a fixed asset or profit earned on raising
capital for a company (by issuing shares at
premium). This is not a regular profit of the
business and is not earned in the ordinary trade
of the business.
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When the business
receives money it is again of two sorts. It my be a
long-term receipt, a contribution by the owner,
either to start the business off or to increase the
funds available to it. It might be a mortgage or an
which brings money into the business for a
long-term, but in this case it is not the owner of
the business but some other investor who is
supplying the money.
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