The Cost Of Revenue And Capital Expenditure

10-2 On the premise that the historical cost of acquiring an asset should include all costs necessarily incurred to bring it to the condition and location necessary for its intended use, in principle, the cost incurred in financing expenditures for an asset during a required construction or development period is itself a part of the asset 's historical acquisition cost. The cause-and-effect relationship between acquiring an asset and the incurrence of interest cost makes interest cost analogous to a direct cost that is readily and objectively assignable to the acquired asset. Failure to capitalize the interest cost associated with the acquisition of qualifying assets improperly reduces reported earnings during the period of acquisition and increases reported earnings in later periods.

The distinction between capital expenditure and revenue expenditure is vital for preparers of financial statements as only capital expenditure is included in the cost of non-current assets in the Statement of financial position. On the other hand, revenue expenditure is deducted from an entity 's ' profit in the statement of comprehensive income. Expensing an item that is normally required to be recognised as an asset under IFRS means avoiding depreciating it over time. However, this does not fall in line with the Companies Act and IAS 1 which state that published accounts must show a true and fair view of the company 's results for the period and its assets and liabilities at the end of the period. (AAT, 2014, p.

When the Subscriber Acquisition Costs are expensed (versus capitalized) the operating income and net income need to be adjusted by adding back the Amortization of Subscriber Acquisition Costs ( that was subtracted out when the expenses were capitalized) and subtracting out the current year 's Subscriber Acquisition Costs.

If I was going to prepare a capital expenditure budget request to add a retail pharmacy in the hospital my first choice of two individuals I want on my team is the manager over the hospital current pharmacy. They would have general knowledge based on the hospital patients what illnesses and medicines are common to deal with and give us a valuable perspective on costs, space and displays. In our text (Smith, 2014) " The manager of the hospital pharmacy can control the number of pharmacists and technicians employed relative to patient volume and technicians employed relative to patient volume and the expense for the management of the pharmacy. All of the factors I mentioned is important with establishing a capital expenditure budget. The other

1. Recognition of concepts. Jim Armstrong operates a small company that books enter¬tainers for theaters, parties, conventions, and so forth. The company’s fiscal year ends on June 30. Consider the following items and classify each as either (1) pre¬paid expense, (2) unearned revenue, (3) accrued expense, (4) accrued revenue, or (5) none of the foregoing.

A problem faced by a Restaurateur (Joe) as revealed by his Accountant-Efficiency Expert (Eff. Ex.)

Would factory security and assembly activities be best classified at an appliance manufacturing plant as unit-level, batch-level, product-level, or organization-sustaining?

| |Within the relevant range, if there is a change in the level of the cost driver, then: | | | |

As the increasingly impotent federal government lurches towards the edge of a self-imposed fiscal cliff, the public and politicians alike have largely accepted the inevitability of deep cuts to the nation's massively inflated budget. While there is still rancorous debate over exactly how the proverbial belt should be tightened, with conservatives demanding reductions in so-called entitlement programs and liberals countering with decreased military spending, a consensus seems to have emerged regarding the budgetary necessity of the National Aeronautics and Space Administration (NASA). Considered by many symbol of bureaucratic waste, with billions of dollars being devoted to implausible missions and esoteric experiments, NASA has been universally targeted as an expendable asset during economic turmoil. Indeed, the most recent federal budget request for 2013 made by President Barack Obama "cuts NASA's planetary science funding from $1.5 billion to $1.2 billion, with further reductions expected in coming years" (Wall), and most experts agree that the era of meaningful governmental investment in space exploration has come to an end. This decision to relegate NASA's cutting edge scientific research and manned space flight missions, once seen as shining emblems of America's global supremacy, to the budgetary dustbin of outdated programs represents a disturbing consequence of the ongoing economic recession. By analyzing the available fiscal data, in

Ideally, Jet2(b) will undertake a strategic combination of cost reduction and revenue growth, however the former is easier and quicker to implement in the short-term.

One of the most important decisions a financial manager can make involves capital budgeting. Capital budgeting is used to determine which fixed assets should be purchased. The purchasing of fixed assets is a form of a long-term investment. Allocating funds in the capital account is a form of capital budgeting. A financial manager will determine if the purchase of a capital asset or fixed asset is worth more over that assets life then it is for the cost to purchase it. In other words, they make sure that the asset would get the amount it cost plus a profit in return.

In todays economic climate every company or organization is looking for a way to get ahead of its competition. Every owner, CEO, or president is looking for away to keep his or her company or organization on solid financial ground. The one thing that they realize is, in order for a company or organization to stay solvent they will need to find away to stay competitive in their perspective markets. They have found that this may be done by some type of investment(s), in the form of acquisition, and or merger. In the world of business, capital budgeting is one of the most important steps that a company or organization can take. This process is called Capital budgeting. Capital budgeting is a process that attempts to determine the future.

This examination paper comprises 6 pages Candidates should answer questions as follows: All questions should be answered. Show all major workings for your numerical calculations. The examination will be marked out of 100 marks. Question 1: 60 marks Question 2: 11 marks Question 3: 14 marks Question 4: 15 marks The following material is provided: Nil Use of calculators: Only calculators on the University of Otago list of approved calculators are permitted. (Subject to inspection by the examiners) Candidates are permitted copies of: One A4 (or smaller) sheet of paper that is

All businesses work with the main objective of making a profit. The determination of the profitability of the businesses will depend on the assessment of various factors of production as they contribute to the final income. The most primitive way of expressing the profit of a firm is through the subtraction of the costs from the revenues. Fixed cost is costs that are not changeable over a long period of time while the variable costs do change as time changes. Traditionally, the statement of accounts and profitability only took into consideration the interplay between the two factors- costs and revenues. In this traditional statement, variable costs and fixed cost were treated similarly. The separation of the costs as either fixed cost or variable cost came into being with the advent of the margin statement. In simplest terms, contribution margin has been used to indicate the result of excess between the revenues and the variable costs. The contribution margin is therefore, an in-depth statement of profit to take to account a lot of other financial variables in the like revenues, expenses, profits, and losses among others. Gross profit is a crude profit since it does not entirely belong to the company’s revenue. These are some of the loopholes in the accounting that the contribution margin exists to seal and it does this through the consideration of net profit in the accounting period other than the gross profit. The most important application of the contribution

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.