About Capital Expenses, Revenue Expenses CA CPT/Foundation Accounts by Prof. Ved

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What is a Revenue Expense?

The Revenue expense relates to the operations of the business of an accounting period or to the revenue earned during the period of the items of expenditure, benefits of which do not extend beyond that period.

What is a Capital Expense?

The Capital Expenditure, on the other hand, generates enduring benefits and helps in revenue generation over more than one accounting period.

If you understand what is capital and what is revenue expense

Answer these questions in True of False

1. Expenses incurred in connection with obtaining a 5 year license to set up a factory is revenue expense.

2. Rs 10,000 paid for transportation from one factory to another factory is a capital expense

3. To increase the efficiency of production forever, automation of a factory was done at the cost Rs 2 lacs. This is capital expense.

4. Money paid to install water treatment plant in the campus of a factory at the cost of rs 10 lacs is a revenue expense.

5. A company was building a new site. It also had to build huts for workers on the site of construction. The cost of this was Rs1 lacs. This is revenue expense.

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