A Study On Capital Expenditure

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Harold Averkamp, a university lecturer explains capital expenditure as the amount spent to either obtain or improve a long-term asset such as a building. This cost is recorded in an account that is classified as Property. Apart from the cost of land ever other cost is charged to the depreciation expense over the useful life period of the asset. A revenue expenditure on the other hand is an amount that is used immediately. For example; routine repairs, these are revenue expenditures due to the fact that they’re charged directly to an account such as Maintenance Expense. Even if the repair doesn’t extend or improve the life of the assets it’s still a revenue expenditure. Expenditure that is on fixed assets is categorised as either capital…show more content…
Steven M Bragg states that, capital expenditures are for assets that are supposed to be productive for a long time. On the other hand, revenue expenditures are related to specific revenue costs such as transactions or operating periods. The main differences between these two concepts are; timing, consumption and size. When it comes to timing, capital expenditure is charged due to depreciation thus charged gradually and over a prolonged period. Whereas, revenue expenditure is charged to the expense either immediately or shortly after. In terms of consumption, capital expenditure is used during the useful life of the fixed asset but revenue expenditure is consumed within a short period. Another difference is the scale of size. Capital expenditures involve larger amounts compared to revenue expenditures; as capital expenditure is only a capital expenditure if it exceeds a certain value. If I doesn’t it’s automatically a revenue expenditure. However in some cases, large expenditures can be revenue expenditures, if they are associated with either sale transactions or are period costs. J.B. Maverick, a stock market analyst says that capital expenditures represent major investments of capital that a company makes to maintain or, more often, to expand its business and generate additional profits. Capital expenses are for the acquisition of long-term assets, such
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