Expenditures considered for purpose of accounting

Question

Write down the different kinds of expenditures considered for purpose of accounting?

Answer 1

i) Capital Expenditure is an amount acquired for acquiring the long term assets like land, equipments, building that are continually employed for the reason of earning revenue. Such are not intended for sale. Such costs are recorded in account that is Property, Plant, and Equipment. Profits from this expenditure are spread on numerous accounting years.

ii) Revenue Expenditure is the expenditure acquired in one accounting year and profits from that is also having in the same period only. This expenditure doesn’t enlarge the earning capability of the business however maintains the existing earning capability of the business. It involved all the expenditures that are acquired throughout day to day running of business. The profits of this expense are for short period and are not forwarded to the subsequently year. This expense is on frequent nature.

iii) Deferred Revenue Expenditure is a revenue expense that has been acquired throughout an accounting year however the profit of that might be extended to a numeral of years. And these are rated to profit and loss account.