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Capital Vs. Revenue Expenditure

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Explain the difference between a capital expenditure and a revenue expenditure. Also, give an example of each and explain the difference in the method of accounting for each expenditure. Explain if there are times that it would be in management's best interest to "shift" an expenditure from a capital expenditure to a revenue expenditure? A short paragraph is needed.

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Capital expenditure is incurred for procuring fixed assets that are expected to be productive for a long period of time. It may also involve an expenditure on an existing fixed asset to increase its life span or residual value. Whereas, revenue expenditure are the costs related to specific revenue transactions or the costs that are incurred for operating the normal course of a business.

Example of capital expenditure: ...

Solution Summary

The difference between capital and revenue expenditures is identified and the method of accounting to be used.

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