1. The advertising expenditure, the benefit of which will last for 5 years. 2. Registration fee paid at the time of purchase of a building.

Question

State whether the following expenditure is revenue or capital. Give reasons for your answers.

1. The advertising expenditure, the benefit of which will last for 5 years. 

2. Registration fee paid at the time of purchase of a building.

Answer 1

1. Revenue Expenditure / Deferred Revenue Expenditure: 

Advertising expenditure is not written off completily to the profit and loss account of the accounting year during which it is incurred. It is spread over a number of years whose benet is likely to be received. 

2. Capital Expenditure: 

Any amount spent on acquistion of an asset or for increasing the nature of an asset is called capital expenditure. Registration fee paid is a capital expenditure.