Capital and Revenue expenditure Watch

ArsenalWenger
Badges: 8
Rep:
?
#1
Report Thread starter 5 years ago
#1
Can someone help me decide if the following are capital or revenue expenditure?

The purchase of a soft drinks vending machine for the canteen with a stock of soft drinks,

Twelve dozen sets of cutlery, purchased by a catering firm for a new dining room.

Purchase of extra filing cabinets for sales office.

Carriage costs on purchases.

Carriage costs on sales.
0
reply
A.A.T.
Badges: 0
Rep:
?
#2
Report 5 years ago
#2
capital = CE
revenue = RE

The purchase of a soft drinks vending machine CE for the canteen with a stock of soft drinks RE

Twelve dozen sets of cutlery, purchased by a catering firm for a new dining room. CE

Purchase of extra filing cabinets for sales office. CE / Could argue it for RE as 'extra' may imply small amount of value.

Carriage costs on purchases RE I assure it literally means Purchases of stock. If carriage of non-current assets then it's CE

Carriage costs on sales. RE

------------
My comments about topic:

1) Balance sheet items are capital expenditure / TP+L are revenue expenditure so think where do the 'items / headings' belong
2) Long term investments are CE
3) Intention to sell or not? if you intend to sell items then its RE, if you buy something without the intention for it to remain in the business then it's CE
4) Does the item add-value then it's CE? e.g. decorating costs for new building would be CE but re-decorating costs after 3 years would be RE.
5) Capital expenditure: all costs associated with enabling a fixed / non-current asset to operate e.g. fixed asset cost itself, installation costs, carriage costs (of fixed asset only, not inventory) etc. Further future maintenance costs are RE.
6) Value of fixed cost e.g. in the above example the Twelve dozen sets of cutlery could be put in to RE as we have no value / amount. A business determines the treatment of CE/RE and must justify all arrangements. Remember all CE are to be depreciated each year so how much value would Twelve dozen sets of cutlery lose? Very arbitrary so you could treat as RE.Twelve dozen sets of cutlery may appear many but everything is relative. I am sure your teacher would enjoy the debate for this example.

This useful?
0
reply
ArsenalWenger
Badges: 8
Rep:
?
#3
Report Thread starter 5 years ago
#3
Very thorough and helpful explanation again, you've helped me alot since A level accounting, cheers.
0
reply
X

Quick Reply

Attached files
Write a reply...
Reply
new posts
Latest
My Feed

See more of what you like on
The Student Room

You can personalise what you see on TSR. Tell us a little about yourself to get started.

Personalise

University open days

  • University of West London
    Postgraduate Open Day - Ealing Site Postgraduate
    Thu, 20 Jun '19
  • University of Warwick
    Undergraduate Open Day Undergraduate
    Fri, 21 Jun '19
  • University of Bath
    Find out about life at the University and discover our diverse range of Undergraduate courses. Our course areas include the Sciences, Humanities & Social Sciences, Engineering & Design, and Management. Undergraduate
    Fri, 21 Jun '19

How did your AQA A-level Chemistry Paper 3 go?

Loved the paper - Feeling positive (256)
32.16%
The paper was reasonable (389)
48.87%
Not feeling great about that exam... (89)
11.18%
It was TERRIBLE (62)
7.79%

Watched Threads

View All