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- 5 Marks
Question
With relevant examples, state the differences between capital expenditure and revenue expenditure. (5 marks)
Answer
- Capital Expenditure:
- It is an expenditure incurred for the acquisition or improvement of a fixed asset, such as buildings, plant & machinery, and vehicles.
- It gives rise to an advantage of an enduring nature, meaning the benefits of the expenditure are consumed over more than one accounting period.
- Example: Purchase of a factory building, or installation of machinery.
- Revenue Expenditure:
- It is an expenditure incurred for the day-to-day running of a business, necessary for the normal operation of the business, such as rent and stationery.
- The benefit of the expenditure is consumed within one accounting period.
- Example: Payment of salaries or rent for the office premises.
- Tags: Allowable Deductions, Capital Expenditure, Income Tax, Revenue Expenditure
- Level: Level 2
- Topic: Income Tax Liabilities
- Series: MAR 2024
- Uploader: Theophilus