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SU M AN
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27 views

Class Presentation

Uploaded by

SU M AN
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Presentation on:

Meaning and concept of capital and


revenue
Introduction to capital expenditure and
revenue expenditure
Difference between capital and revenue
expenditure
Meaning and concept:

Capital
Capital are those money or any form of assets that are
owned or hold by any business firms, an individual or by
any organization to start a business or for the purpose of
investment. In simple words, it is money or assets in
business . Capitals have long term effects on business or
are used in a long period of time. They are non-recurring in
nature. In fact , they are assets, liabilities, and capital that
determines the financial strength of business.
Revenue

Revenue
Revenue are the income generated from business operation and other
business activities. In general terms, these means making additional wealth through
the investment of original capital. They have short term effects on business normally
less than a year. Revenues are concerned with the payments for producing or buying
goods and receipt from sale of goods and services. The nature of revenue are
reccuring as they are found to be conducted everytime during business hours. In fact,
revenue items are incomes and expenses that determines the operating result of the
business i.e profit and loss.
Basis for classifying capital and revenue

Objectives:
Capital concept is concerned with expenditure made for increasing earning
capacity whereas revenue concept is concerned with maintaining current earning
capacity.
Time period:
Capital items are concerned for long term whereas revenue are concerned for
short term in nature.
Nature:
Revenue are recurring whereas capital are non recurring in nature.
Amount:
The amount of capital are huge compared to amount of revenue.

Classification
Capital and revenue
Expenditure Receipt/
Income Gain/loss Reserve

Capital Capital Capital


Capital
Expenditure receipt reserve
gain/loss

Revenue
Revenue Revenue Revenue
receipt
Expenditure gain/loss reserve
Capital expenditure and Revenue
expenditure
 The expenditure that are made by company for the purchase, improvement or for maintenance of
long term assets to improve or increase the efficiency or capacity of the company are known as
capital expenditure. The benefits last for long period. Examples are expenditure on land , building
, machines etc.
 The expenditure that are made to meet the running expenses of a business which gives benefit in
the current time only is called revenue expenditures. Some examples are assets purchased for
resale purpose, expenses made for administrative, marketing etc.
Difference between capital and revenue
expenditure
Basis Capital Expenditure S Revenue Expenditure
N
Meaning Expenses that are made to 1. Expenses that are made to achieve instant
provide benefits for longer benefit during the business hours.
period of time
Associated Associated with the purchase 2. Associated with the maintenance and up
with of fixed assets keep of fixed assets
Nature Non-recurring in nature 3. Recurring in nature
In balance These expenditure are shown 4. These expenditure are shown in Dr side
sheet in assets side of balance sheet of trading or profit/loss account
Helps to Increase earning capacity 5. Maintain earning capacity
Presented by:
Sita and Radhika

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