Journal Entry of Capital Expenditure and Revenue Expenditure in Accounting
Capital Expenditure | Revenue Expenditure |
Expenditure incurred for acquiring assets, to increase earning the capacity of an existing asset that results in increasing its lifespan | the expense incurred for maintaining the day-to-day operation activities of a business |
The time of capital expenditure is long term | The time of revenue expenditure is short terms |
It enhance the value addition of existing or new asset | It does not enhance value addition of any assets |
IT generally have physical existence | IT does not have physical existence |
These expenditure are not recurring in nature. | These expenditure are recurring in nature. |
It does not effects company revenue as it is not shown in the profit and loss accounts | It effects company revenue as it is not shown in the profit and loss accounts |
It gives long term benefits for the company | IT gives short term benefits for the company |
It appears on the assets side of the balance sheet | It appears on the Profit and loss side in the expense side. |
JOURNAL ENTRY OF CAPITAL EXPENDITURE
Capital Expenditure is that expenditure that is made while purchasing any asset or acquiring any asset in business.
Example suppose If we have Purchased a Machinery and paid its carriage and installation charges there are some expense which we made while purchasing an asset, therefore, they will be added to the cost of machinery.
Example Machinery Purchased Rs 100000 and paid Rs.4000 on its installation and paid Rs 6000 on cartage.
hence the nature of expense is Capital:
Journal entry for the same will be
|
Machinery A/c |
110,000 |
|
To Cash A/c |
` 110000 |
|
BEING MACHIENRY PURCHASED |
|
Suppose we owned a Mutiplex cinema where we have arrangement of 100 seats if we want to incease the size of mutiplex by adding 50 more seats by investing Rs 100000 on chairs Rs 20,000 on installation Rs 40,000 on repairthen the journal entry for the same will be.
|
Furniture and
Fixture A/c Dr |
1,60,00 |
|
To Cash A/c |
` 160000 |
|
BEING SEATS
ADDED IN MUTIPLEX |
|
JOURNAL ENTRY OF REVENUE EXPENDITURE
Revenue expenditure is expenditure which is our operations expense which occur day to day . They are recurring in nature..Thet are shown seperately in accounting transaction as they are at the end of accounting year shown on the Profit and loss accounts.
Example
Suppose we purchased goods worth Rs 10,000 and paid carriage Rs 2000.
Hence journal entry for the same will be
|
Purchase A/c Dr |
10,000 |
|
Carriage A/c
Dr. |
2,000 |
|
To Cash |
12,000 |
|
(BEING GOODS PURCHASED AND CASH PAID |
|