Scribd
Upload
124 views4 pages

Capital and Revenue Expenditures

Capital expenditures are investments in long-term assets like property, equipment, and machinery. Revenue expenditures are routine operating expenses like salaries, rent, and insurance. The document provides examples of each type and how to calculate the total cost of a machine purchased by X Corporation, including its list price, discounts, taxes, delivery and installation fees, insurance, and repairs. Journal entries are made to record the machine purchase and related capital expenditures.

Uploaded by

Mir Beeberg
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
124 views4 pages

Capital and Revenue Expenditures

Capital expenditures are investments in long-term assets like property, equipment, and machinery. Revenue expenditures are routine operating expenses like salaries, rent, and insurance. The document provides examples of each type and how to calculate the total cost of a machine purchased by X Corporation, including its list price, discounts, taxes, delivery and installation fees, insurance, and repairs. Journal entries are made to record the machine purchase and related capital expenditures.

Uploaded by

Mir Beeberg
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 4

CAPITAL AND REVENUE EXPENDITURES

CAPITAL EXPENDITURES REVENUE EXPENDITURES


Investment made by the business for acquiring They are routine expenses / operating expenses.
any tangible fixed assets. For example; Purchased For example; rent expense, salaries exp.
of office equipment by the business, building, Advertising expenses, insurance expenses, etc.
machinery, furniture, etc.
Characteristics of capital expenditures:  Short life (i.e. less than a year)
 These assets are acquired not for resale  They are shown in income statement.
purpose.  Repair cost: for example; during loading or
 They are long (but limited) lived assets. unloading certain part of machine is
 They are shown in balance sheet. damaged.
 Any future insurance; for example; fire
Other expenses also included in capital expenditures insurance, etc.
Purchases a machine
Sales tax
Transportation in / carriage in / freight in
Custom duty / import duty
Installation charges
Labor charges / foundation charges
Package charges
Registration charges
Insurance in transit
How to calculate cost of any tangible fixed assets
X corporation has purchased a machine at a list price Rs. 200,000 with 10% trade discount. The business
also availed terms and conditions of cash discount i.e. 2/15 , n/45. Following expenses also incurred
while purchased of machine:
I. 5% sales tax
II. Installation charges Rs. 1,000
III. Transportation cost Rs. 3,000
IV. Fire insurance incurred Rs. 6,000
V. Certain part of machine is damaged during installation costing Rs. 2,000.
VI. Registration cost Rs. 5,000

Required: 2/15,n/45: 2% cash discount is


a. Compute cost of machine offered if payment is made
b. Record necessary general journal entries. within 15 days or otherwise no
discount is offered and
payment should be made
within 45 days.
X Corporation
Computation of Cost of Machine
List Price……………………………………..Rs. 200,000
Trade discount (200,000 x 10%).. (20,000)
Trade Price 180,000
Cash discount (180,000 x 2%) (3,600)
Cash Price / Bill price 176,400
ADD: OTHER CAPITAL EXPENDITURES
Sales Tax (5% of cash price) Rs. 8,820
Installation charges 1,000
Transportation cost 3,000
Registration cost 5,000
Total other capital expenditures 17,820
Total Cost of Machine Rs. 194,220

1. Machine 176,400
Cash 176,400
(Purchased of machine at cash)

2. Sales Tax 8,820


Installation charges 1,000
Transportation cost 3,000
Registration cost 5,000
Cash 17,820
(Expenses incurred on machine)

3. Machine 17,820
Sales Tax 8,820
Installation charges 1,000
Transportation cost 3,000
Registration cost 5,000
(Close all expenses incurred
On machine)

4. Fire Insurance 6,000


Repair cost 2,000
Cash 8,000
(Paid fire insurance and
repair cost)

Marine Insurance

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy