Capital expenditure is expenditure made in the acquisition, construction and improvement of non- current assets that are expected to generate economic benefits in more than one accounting period. A capital expenditure is an amount spent to acquire or significantly improve the capacity or capabilities of non current assets. They are recorded as Non current assets in the statement of financial position.
Examples of capital expenditure:
Revenue expenditure is expenditure made for the day to day running of the business. Revenue expenditure is an amount that is spent for an expense that will be matched immediately with the revenues reported on the current period's income statement. Revenue expenditure is treated as an expense in the income statement.
Examples of revenue expenditure:
Effects if capital expenditure treated as revenue expenditure.
Effects if revenue expenditure treated as capital expenditure
Capital receipts are the income from non-recurring streams, or from non-usual business operations. They result in an increase in the total capital of a company and are shown in the statement of financial position.
Examples / Sources of capital receipts
Issue of shares / debentures
loan from a bank or financial institution
grant from the government
Insurance claim or any additional claim by owner.
money received from the proceeds (disposal) of non-current assets
capital invested by owner
Revenue income (receipts)
Revenue receipts are the outcome of core business activities. It is the income that a company earns from its day-to-day operations. In other words, all activities happening on a daily basis that brings in cash for the business form part of a revenue receipt.
Examples / sources for revenue receipts