Question

Differentiate between the Capital and Revenue Expenditure on the basis of purpose, earning capacity and placement in financial statements.

Answer 1

BASIS	CAPITAL EXPENDITURE	REVENUE EXPENDITURE
Purpose	It is incurred for acquiring of fixed assets	It is incurred for maintenance of fixed assets.
Earning Capacity	It increases the earning capacity of the business.	It helps in maintaining the earning capacity of the business intact.
Placement	It is an item of Balance Sheet and is shown as an item of asset.	It is an item of Trading and Profit and Loss Account and is shown on the debit side of either of the two.