When revenue expenditure will be treated as a capital expenditure?

Table of Contents

A revenue expenditure and a capital expenditure depends on the Accounting Standard(AS)  of the company and specific company policies. According to generally accepted accounting principles(GAAP), any assets that has a life more than one year can be considered as a capital asset. However, it can be time consuming and complex.

– If the wages and salary are paid for creating a permanent assets of the company  or increasing its earning capacity during the financial period that time it will be treated as capital expenditure of the company.

– If carriage and freight charges incurred for bringing a fixed asset to the place of business than it will be treated as capital expenditure.

– Repair of an  old machinery of a company or a building purchase for keeping in   the business in making it useful.

– The expenses which are used in development like mines, tea and Rubber plantation ,they provide returns after a long span of time than it is include in capital assets.

– Interest paid on amount borrowed for construction of factory, plant building.

-The raw materials which is used for creating a permanent assets for the company use is also include in capital expenditure.

                                                                               -Nehal Sharma

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This Post Has 4 Comments

  1. kamlesh salvi

    Nehal ji its very good content
    Thanks for this blog
    it will be very helpful for commerce students

  2. varsha kumawat

    good

  3. Bhavya chittora

    Helpful

  4. Manish borana

    Nice

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