what are the differences of capital expenditure and revenue expenditure?

Answer 1

Capital expenditure end up in the balance sheet. They are funds used by a company to acquire or upgrade physical assets such as property, industrial buildings or equipment. This type of outlay is made by companies to maintain or increase the scope of their operation. These expenditures can include everything from repairing a roof to building a brand new factory.

The amount of capital expenditure a company is likely to have depends on the industry it occupies. Some of the most capital intensive industries include oil, telecom and utilities.

In terms of accounting, an outlay is considered to be a capital expenditure when the asset is a newly purchased capital asset or an investment that improves the useful life of an existing capital asset. If an outlay is a capital expenditure, it needs to be capitalized; this requires the company to spread the cost of the expenditure over the useful life of the asset. If, however, the outlay is one that maintains the asset at its current condition, the cost is deducted fully in the year of the expense.

A revenue expenditure is any of a company's expenses like salary, upkeep of equipment, utilities, rent, etc. Revenue expenditure end up in the income statement.

Answer 2

Capital expenditures are....drumroll please...capitalized. Meaning, they are booked as assets on the balance sheet and depreciated over time.

Revenue expenditures hit the P&L.