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Financial Statements
Quick questions on Capital and revenue expenditure: N(A)-Level Principles of Accounts
5short Q&A pairs drawn directly from our worked dot-point answer. For full context and worked exam questions, read the parent dot-point page.
What is capital expenditure?Show answer
Capital expenditure is spending to buy, add to, or improve a non-current asset that will benefit the business for more than one year. It is recorded as a non-current asset in the statement of financial position, not as an expense. It includes the purchase price plus costs of getting the asset ready, such as delivery and installation.
What is revenue expenditure?Show answer
Revenue expenditure is spending on the day-to-day running of the business, used up in the period. It is recorded as an expense in the income statement. Examples are wages, rent, fuel, and repairs that simply maintain an asset.
What is q1?Show answer
State whether buying a new computer is capital or revenue expenditure. [1 mark]
What is q2?Show answer
A business repaints its shop for \1,200$. Classify this and state where it is recorded. [2 marks]
What is q3?Show answer
Explain the effect on profit of treating revenue expenditure as capital expenditure. [2 marks]
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