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Capital & Revenue Expenditure Contingent Assets & Liabilities & Rectification of Error
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Capital & Revenue Expenditure & Receipts
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Index Capital Expenditure Revenue Expenditure Deferred Revenue Expenditure Capital Receipt Revenue Receipt Š MeraSkill
Considerations for Determining Capital & Revenue Exp Nature of business Nature of expense Benefit of expense Effect on revenue generating capacity of business Materiality of amount Š MeraSkill
Capital Expenditure Benefit derived over more than a year
Increases revenue earning capacity
Materiality
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Revenue Expenditure Benefit derived only in current period
Usually recurring in nature
Maintenance charges
Non material items Š MeraSkill
Implications of wrong recording Revenue Expenditure wrongly recorded as Capital Expenditure will result in : (a) Overstatement of net profit and understatement of assets (b) Overstatement of net profit and overstatement of assets (c) Understatement of net profit and overstatement of assets (d) Understatement of net profit and understatement of assets
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Implications of wrong recording Capital Expenditure wrongly recorded as Revenue Expenditure will result in : (a) Overstatement of net profit and understatement of assets (b) Overstatement of net profit and overstatement of assets (c) Understatement of net profit and overstatement of assets (d) Understatement of net profit and understatement of assets
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Deferred Revenue Expenditure Revenue in nature Matching with revenue deferred Deferred revenue expenditure vs Prepaid expenses Discount on issue of Debentures, R& D Expense
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