35. c. Sale of old sports materials. (b) Wages paid to business’ workers for extension of its building. Liabilities: money that the company owes to others (e.g. IAS 1 sets out the overall requirements for financial statements, including how they should be structured, the minimum requirements for their content and overriding concepts such as going concern, the accrual basis of accounting and the current/non-current distinction. Balance amount is shown in the Balance Sheet as an asset and it is written off in future years. Smaller-scale software initiative or subscription. Capital losses occur when selling fixed assets or raising share capital. Capital profits are earned as a result of selling some fixed assets or in connection with raising capital for the firm. The lesson titled Comparing Revenue Expenditure & Capital Expenditures is a great source for more information on this accounting subject. Revenue Re­ceipts are shown in the Profit and Loss Account. The following objectives are covered in this lesson: (iv) Octroi duty paid on machinery. Classify the following items into capital and Revenue . There are two main types of revenue items; (i) revenue expenditure and (ii) revenue receipts. Learn. (f) Legal expenses incurred for debt collection. The amount of discount is a capital loss. (d) Annual service costs for a … 3. Home - To fully understand how to post transactions and read financial reports, we must understand these account types. Classify with reasons that which of the above items are capital expenditure and which are revenue expenditure? Syed alfaz . (c) Capital Expenditure = The removal of the business to the new site will enhance the income earning capacity of the business; this expense will be treated as capital expenditure. Classify each of the following items as belonging in the revenue, expenditure, human resources/payroll, production, or financing cycle. Cash ix. Non-Tax Revenue: Non-Tax revenue refers to receipts of the government from all sources other than those of tax receipts. For example a land purchased by a business for Rs 2, 00,000 is sold for Rs. Sales iv. A. They are shown in the asset side of Balance Sheet. Revenue receipt = Shown as income in income statement. (b) Cost of pulling down an old building in order to replace it by a new one. The following points of difference between capital expenditure and revenue expenditure gives the importance of the distinction: 1. Capital Expenditure Capital expenditure includes costs incurred on the acquisition of a fixed asset and any subsequent expenditure that increases the earning capacity of an existing fixed asset. Receipts and invoices keep the records of expenditures. The following are the types of capital and revenue items in accounting: Capital Receipts is the amount received in the form of additional Capital (by issuing shares) loans or by the sale proceeds of any fixed assets. Multiple choice questions (MCQs) Chhavi sharma . State with reasons whether the above items of expenditures are capital or revenue in nature: (a) Capital Expenditure = When a second hand asset is purchased then any expenditure incurred to put it into working order will be treated as capital expenditure. (E) Capital Losses: Capital losses occur when selling fixed assets or raising share capital. 4. Another example, suppose a company issues its shares of the face value of Rs 100 for Rs 110 each, i.e. So, it is important to classify the Capital and Revenue Items. 2. Revenue Receipts are the amount received in the ordinary course of a business. Capital Receipts are shown in Balance Sheet. discount of Rs 5. Purchases v. Unsold Stock vi. (d) Payment made to purchase an existing business. Classify the following items as capital or revenue expenditure : (i) An extension of railway tracks in the factory area; (ii) Wages paid to machine operators; (iii) Installation costs of new production machine; (iv) Materials for extensions to foremen’s offices in the factory; (v) Rent paid for the factory; (vi) Payment for computer time to operate a new stores control system; (vii) Wages paid to own employees for building … Content Guidelines 2. Nice. Then indicate whether each item increases or decreases stockholders’ equity. Purchase of Building 2. In order to understand them, one should know the correct principles governing the allocation between capital and revenue. Machinery ii. 50,000 spent for railway siding. (b) Economic assistance given according to Ladli scheme. Purchase raw materials b. It is not easy to give a correct rule to allocate capital items and revenue items. 2, 50,000. A two-year premium paid on insurance policy. Flashcards. Salaries paid to staff 4. Answer the following questions in depth .... 1. Definition Revenue Items: Revenue items are those items having short term effects on business, (normally less than one year). Subscriptions received in advance by a magazine publisher. The main sources of non-tax revenue are: 1. are solved by group of students and teacher of Commerce, which is also the largest student community of Commerce. (i) Free supply of stationery to the students by the government ... Classify the following items into capital and revenue: 1. Legal fees paid for assessing title deeds for purchase of building 3. For example, repairs, wages, salaries, fuel, etc., are revenue items. Question 4. This can be a payment is cash or can also be the exchange of some valuable item in exchange for goods or services. Question: Classify Each Of The Following Items As Belonging In The Revenue, Expenditure, Human Resources/payroll, Production, Or Financing Cycle. Revenue expenses are short-term expenses to meet the ongoing operational costs of running a business. Image Guidelines 5. Report a Violation, Treatment of Some Typical Items in Fund Flow Statement: 9 Items, Accounting Treatment of Special Items (11 Items), Consignment Transaction at Cost Price Method (Accounting Entries). (v) Octroi duty paid on goods. (g) Legal expenses incurred in purchasing a landed property. But the range is wider than that. Module 2: Capital & Revenue Expenditure Classify the following expenditure/income into capital and revenue with reasons: 1. So far, we’ve spoken mainly about physical revenue expenditures. STUDY. To a large extent, accounting attempts to resolve these issues by relying upon the statement preparer's subjective judgements. a. When Capital Profit arises, Capital losses are gradually written off against them. (e) Revenue Expenditure = The expenditure is related to purchase of goods for resale, which itself is a revenue expense, therefore, carriage is also a revenue expense. Revenue profits appear in the Profit and Loss Account. Rs 50,000 are a profit of capital nature. The proper allocation of capital items and revenue items are important for the fundamental principles of correct accounting. Prohibited Content 3. [3-4 Marks] (a) Free supply of stationary to the students by the government. 4. Such losses are debited in the Profit and Loss Account. Capital expenditure = Shown as a non-current asset in the balance sheet. I think it is better to go through this MCQ’s. Revenue expenditure = Shown as an expense in the income statement. Ram (Customer) viii. b. 3. In order to know the fair performance and financial standing of a business; the nature of business transactions taking place during the year has to be analyzed. Cost of goods sold. is also a revenue receipt. Capital expenditures are major investments of capital to expand a company's business. b) The cost of replacement valves on all the labeling machines in a canning factory. Plagiarism Prevention 4. Rs 10 is capital profit. It is also defined as items that are considered as long-give assets of a firm or items that occupy the assets section in a balance sheet called Capital Items. The Questions and Answers of Classify the following items as revenue receipts, revenue expenditure, capital receipts and capital payments? Classify the following items into revenue expenditure and capital expenditure. Capital and revenue items. 2. (d) The freight, carriage and the installation charges cost on new machine amounting to $400. According to modern approach, the accounts are classified as asset accounts, liability accounts, capital or owner’s equity accounts, withdrawal accounts, revenue/income accounts and expense accounts. Reply. Rs. 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