...Revenue Expenditures & Capital Expenditures Tracey DeSautel November 1, 2014 University of Phoenix XACC/291 In the world of accounting, there are numerous types of expenses that come along with running a business on a day to day basis as well as overall. There are things that break down and add value to the companies assets as well as things that are expensed to run the business on a daily basis. These can break down to two important items and those are Revenue expenditures and Capital Expenditures. Revenue expenditures is the amount that is expensed immediately. Thereby being matched with revenues of the current accounting period. Examples include things such as routine repairs because they are charged to a direct account such as “ repairs and maintenances expenses> these do not extend the life or improve the assets for the company. Capital expenditures are amounts spent to acquire or improve a long term asset. These can be things such as buildings or even equipment. These are usually recorded in accounts classified as “ property, plants and equipment”. These are charged to depreciation expense over the assets lifespan. It breaks down to capital expenditures are for items such as machinery and buildings where as revenue expenditures are for things that create revenue such as advertising and labor. A further look into capital expenditures and examples are that, that do not occur in daily transactions for the company and include such purchases that may include the...
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...Revenue and capital expenditure are aspects of business management that seem very similar at first. Both revenue and capital expenditure are purely focused on the process of spending money to help a business survive and grow. The key difference between the two is the intention of the expenses and the direction of the money flow. Revenue is for short-term costs that are not used afterwards to make the company grow, such as repairs which are most common. Capital expenditure is for assets that are considered or categorized long-term, such as new vehicles or software, which will be used to make the company stronger. Revenue expenditure is money being spent immediately and exclusively for short-term purposes. These are expenses associated with profit-producing assets, such as repair, that may or may not increase the life of the given asset. Revenue expenditure is more often associated with day-to-day costs the company accrues through its life cycle. Capital expenditure is money is being spent on assets that will increase the company’s ability to pull in profit or operate at a higher performance level. New software technology, vehicles, machinery and tools that will be used for at least 12 months are considered capital expenditure. Capital expenditure, unlike revenue, is looked at more as an investment than a cost, because it is being used to strengthen the company so it can do better business. When purchasing a capital asset, a business either will spread the cost out over the asset’s...
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...Government Expenditure and Revenue by Ooi Soon Beng After studying this chapter, you should be able to understand: Public Budget Budget Deficits and Surplus Expansionary and Contractionary Fiscal Policy Discretionary and Automatic Fiscal Policy National Debts and Its Issues and Misconceptions Problems with Fiscal Policy : Macroeconomics According to Keynes, government has to intervene to stabilize the economy. Stabilization can be achieved in part by manipulating the Public Budget to increase output and employment or to reduce inflation. The Budget outlines the government’s taxation and expenditure plans for the coming fiscal year. The Ministry of Finance are responsible for the preparation of the budget. Sources of Revenues: Direct taxes on individuals and companies Indirect taxes on goods and services (gasoline, alcohol, tobacco, etc) Non-tax revenue (stamp duty, licenses, permits, etc) Malaysia: Sources of Revenue (in RM) 1990 2013 2014 Direct Taxes 35.2% 56.5% 59.1% Indirect Taxes 36.7% 16.6% 17.2% Non-Tax Revenue 28.0% 26.9% 23.7% Total Revenue 29,521m 207,913m 224,094m Source: Ministry of Finance Categories of Expenses: Operating Expenditure (emolument, pensions, debt servicing, grant to states, subsidies, supplies, scholarships, etc) Development Expenditure (security, social services, economic services, expenditure on goods...
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...Capital and Revenue Expenditures 1 Capital and Revenue Expenditures Clarissa Jude April 24, 2015 University of Phoenix Capital and Revenue Expenditures 2 “A capital expenditure is an amount spent to acquire or improve a long-term asset such as equipment or buildings. Usually the cost is recorded in an account classified as Property, Plant and Equipment. The cost (except for the cost of land) will then be charged to depreciation expense over the useful life of the asset. A revenue expenditure is an amount that is expensed immediately—thereby being matched with revenues of the current accounting period. Routine repairs are revenue expenditures because they are charged directly to an account such as Repairs and Maintenance Expense. Even significant repairs that do not extend the life of the asset or do not improve the asset (the repairs merely return the asset back to its previous condition) are revenue expenditures.” (Wizell, John, Accounting Made Easy. 2010). This in summary means that every cost to purchase, keep up and maintain said purchase will be reported in the financial documents. The difference between capital and revenue expenditures are: Capital Expenditures | Revenue Expenditures | 1 | Its effect is long term i.e., it is not exhausted within the current account year. Its benefit is enjoyed in future year or years also. In a word, its effect is reduces gradually. | 1 | Its effect is temporary, i.e., it is exhausted...
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...Reflection Expenditures are unavoidable for any company to exist in the competitive market, to expand the business or to find new opportunities to open up beneficial business in those areas, etc. Expenditure is defined as payments of cash or cash equivalent for goods or services, or a charge against available funds in settlement of an obligation as evidenced by a source document like invoice, voucher, receipt, etc. All payments made by a company can be broadly categorized into capital expenditure and revenue expenditure. Capitol expenditure is an amount spent to acquire or enhance a productive asset to increase the capacity or efficiency of a company for more than an accounting period is defined as capital expenditure. That is, simply, capital expenditure is the expenditure made with the intension of getting the benefit from that expenditure for more than one year (usually accounting period is one year). For example, amount spent on long-term assets like machinery, plants, buildings, etc, either to improve or to acquire, is capital expenditure. Normally capital expenditure is capitalized in the books of accounts and then that amount will be depreciated over the useful life of the assets. It is also known as capital spending. It is essential to understand the differences between capital expenditure and revenue expenditure as the accounting treatments are different. Revenue expenditure is cash or resources spent on sales revenue generation or for maintaining...
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...daily incur revenue expenditures to upkeep their operating efficiency and productive life of an asset. Expenditures are unavoidable as well as they are very necessary to expand the business. Expenditures are payments of cash or cash equivalent for goods or services. The difference between revenue and capital expenditures is that revenue expenditures are expenses that are immediately charged against revenue as expenses. Regular and periodic repairs are revenue expenditures because they are charged directly to specific accounts. Examples of these accounts would be Repairs and Maintenance Expense. Capital expenditures are expenditures will increase the company’s investment primarily in productive facility. A capital expenditure is an amount spent to attain or improve a long term asset such as buildings or equipment. When recording capital expenditure, it is usually recorded in accounts classified or titled as Property, Plant and Equipment. Generally, because capital expenditures provide income for the company over a period of years, companies are not allowed to deduct the full cost of the asset in the year the expense is incurred. Revenue expenses typically are shorter term expenses because they always required to meet the ongoing operational costs of running a business. (Investopedia, 2015) The contrasting factor of capital and revenue expenditures is that revenue expenditures can be fully tax deducted in the same year the expense occurred. Revenue expenditures can be considered...
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...the difference between capital and revenue items of expenditure and income Capital income Capital income is money coming into the business, but not necessarily from direct sales of products or services. Capital income is money that comes into the business but not as revenue from what the businesses main frame of making profit is. Zara’s capital income would be any loans that the business receives. Another form of capital income Zara receives is money that comes into the business from sales of shares. Sole trader’s capital investments is also another form of capital income. Revenue income Revenue income is money coming into the business from sales of goods or services. This is the form of revenue that the businesses main purpose for setting up is to make profit in this form of revenue income. Revenue income could also be from receiving payments loans given out with interest in return or money coming in from rent payments that come into the business. Zara’s main form of revenue income is from the sales of their clothing goods both online and in store. Difference between capital and revenue income The difference between capital and revenue income is that capital income is made from money that comes into the business but not from the direct method that the businesses main purpose of making profit is. For example a business’s main objective may be to make as many sales from a product as possible, the money that they receive from this is revenue income because it is money from...
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...by the classifying expenditure into capital expenditure and revenue expenditure. In this discussion we going to investigate characteristics of each type of expenditure and consider the practical problems involved in making such a difference. For the purpose of that essay, I am going to use examples from Angus Shop accounting statements that have been prepared by group 6, as part of group coursework assignment. Before starting discussion, it is essential to define major terms. According to (Wood and Sangster, 2015) “Capital expenditure used when a business spends money to buy or add value to a non-current asset”. According to the same authors “Revenue expenditure are expenditure which is not spent on increasing the value of non-current assets, but is incurred in running the business on a day-to-day basis”. Therefore, the main difference between those two expenses is their functions. The...
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...Capital Expenditures & Revenue Expenditures Veronica rowe XACC/291 Jan 29, 2014 Shontell Chrisman Capital Expenditures & Revenue Expenditures Capital expenditures; a sum spent to procure or development of a long term asset, such as buildings or equipment. Under normal accounting methods the cost is put under equipment, plant, property. Everything except the cost of land can be charged as depreciation expenditure over the useful life of the asset. Capital expenditures are put on financial report as an asset on balance sheet. Capital expenditure rewards are spread over several accounting periods. Capital expenditures can include replacement cost to delivery cost, legal charges and everything in between. Revenue expenditures; are amounts distributed out instantaneously, they match entries of the existing accounting period. Scheduled maintenance is a revenue expense, because they are charged without waiting to an account like maintenance and repairs expenditures. Major repairs do not affect the life of the asset. Revenue expenditures are put on financial report on the income statement. Revenue expenditures may include maintenance charge, repair, and renewal and everything in between. Both are classified as assets. The difference between the source of Capital and Revenue expenditures is special, because Capital is comprised of cost related to fixed assets, and Revenue expenditures affect is temporary, they come often and contains no physical presence, and does not...
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...notes to the financial statements. The financial statement does contain two government wide financial statements which are the statement of net position (p15) and the statement of activities (p16) and seven fund financial statements. The management discussion and analysis section contains the overview of financial activities of the city of Topeka. C) What information is provided in the statistical section? The statistical section mainly provides information about the financial trends, debt capacity, revenue capacity and the economic information. Question - two basis of accounting The basis of accounting is used in the general fund is the general fund is the modified accrual basis. This information can be found on p 18 and p 29 of the CAFR. Because of the City of Topeka does have the long term liabilities and capital assets, this would cause the difference between the governmental funds and the governmental wide statement. By viewing the statement of revenues, expenditures, and changes in fund balances of governmental fund (page 19). We suppose...
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...directly linked to an identifiable function. Revenues should be distinguished between program revenues and general revenues. Program revenues are reported in the program or functions section of the statement. General revenues are not directly linked to any program orbfunction and reported in the bottom section of the statement. Program revenues are reported in the charges for services, operating grants and contributions and capital grants and contributions. Extraordinary items, special items, and transfers are reported separately on the government-wide statement of activities. Extraordinary items are both unusual in nature and infrequent in occurrence which is usually beyond the control of management. Special items are either unusual or infrequent and must be within the control of management. Used to account for the general administration and most traditional services of government. The General Fund is used to record the budgetary inflows and outflows estimated or authorized in the annual budget. In the Operating Statement Accounts the Revenues and Other Financing Sources increase fund balance when closed and are recognized on the Modified AccrualExpensive. Expenditures and Other Financing Uses decrease fund balance when closed and are recognized on the Modified Accrual basis. Periodically compare actual revenues to estimated revenues. Use a common classification scheme for revenues and estimated revenues. Estimated Revenues and Revenues are used to control similarly named columns...
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... | | | |3-2 |Distinguishing direct and indirect expenses |Define and describe |New | |3-3 |Statement of activities format |Describe |3-2 revised | |3-4 |Program and general revenue |Distinguish |Same | |3-5 |Extraordinary compared with special items |Define and compare |3-5 expanded | |3-6 |Expenditure classifications—examples |Classify |Same | |3-7 |Temporary and permanent accounts |Distinguish |3-7 revised | |3-8 |Revenue classifications...
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...differences in revenue expenditures and capital expenditures it is important to know what they are and how a company records and reports them. According to Weygandt, Kimmel & Kieso, (2010) during the useful life of a plant asset, a company may incur costs for ordinary repairs, additions, or improvements. Ordinary repairs are expenditures to maintain the operating efficiency and productive life of the unit. Companies record such repairs as debits to Repair (or Maintenance) Expense as they are incurred. Because they are immediately charged as an expense against revenues, these costs are often referred to as revenue expenditures. According to Weygandt, Kimmel & Kieso, (2010) additions and improvements are costs incurred to increase the operating efficiency, productive capacity, or useful life of a plant asset. They are usually material in amount in occur infrequently. Companies generally debit these amounts to the plant asset affected. They are often referred to as capital investments. Most major U.S. corporations disclose annual capital expenditures. Similarities There is only one similarity between revenue expenditures and capital expenditures. They are similar because they both have an effect on operating efficiency. Differences There are more differences between revenue expenditures and capital expenditures than similarities. Revenue expenditures are smaller and more frequent while capital expenditures are larger and infrequent. Revenue expenditures “maintain” the...
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...San Francisco State University Accounting 504 Midterm I The point value for each question is indicated below. Since the test will be graded using a positive grading system, it is to your advantage to ATTEMPT EVERY QUESTION. If you have any questions, please ask me. Good Luck!! 1. A statistical section should be included in a. A Comprehensive Annual Financial Report b. The basic financial statements c. The notes to the financial statements d. Required Supplemental Information and Basic Financial Statements | | | | |The Governmental Accounting Standards Board is the primary standard-setting body for: | | | | | |All governments. | | | | | |All state and local governments. | | | | | |All governments and all not-for-profit entities. | | | | | |All state and local governments and all not-for-profit entities. | | | | | | ...
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...Public finance is sometimes synonymous with government finance. It deals with budgeting the revenues and expenditures of a public sector entity, usually government. Public finance also can be defined as the raising of money by governments through taxes or borrowing and the spending of it. In Japan, the national budget and other basic matters on public finance are governed by the Public Finance Law, 1947 (Law No. 34, Apr. 31, 1947), which has been amended time to time. This report gives an insights of the Japan’s public finance in general begins with a historic overview. A special emphasis is given to the tax system in Japan for financing the public expenditures. Finally, this report makes a comparative analysis of Japan’s public finance with that of Bangladesh. A. Historical Overview of Japan’s Public Finance Until the mid of 1960s, Japanese Government followed a balanced budget policy. Because of revenue shortfall, in 1965 the government started to issue bonds (mainly construction bonds) to finance the gap. The oil crisis in 1973 stagnated the tax revenue and pushed the government to amend the Public Finance Law to permit the issuance of special deficit-financing bonds in FY 1975. The government had to pass this special law for each year for deficit financing until FY 1989. During the 1970s, almost one-third of total expenditure was financed by issuing of public bonds. However, this ratio has been declined to 9.5% due fiscal consolidation and economic bubble in 1980s...
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