Account 1 Marks Question

Capital Receipts and Revenue Receipts:

	Capital Receipt	Revenue Receipt
1	It is the amount realised by sale of fixed assets or receipt as capital or loans taken.	Receipt It is the amount realised by sale of goods and/or rendering of services.
2	It is shown in Balance Sheet.	It is shown in Trading Account or Profit and Loss Account.
3	Capital Receipts are normally of non-recurring nature.	Revenue Receipts are normally of recurring nature.
4	Receipts are the receipts which are not received in course of normal business activities.	Revenue Receipts are received in the course of normal trading operations.
5	Capital Receipts are normally not available for payment.	Revenue Receipts, i.e., net of revenue expenses and expired portion of Capital Expenditure/Deferred Revenue Expenditure are available for distribution to the owner of the business.

1. Capital Expenditure and Revenue Expenditure:

	Basis	Capital Expenditure	Capital Expenditure
1	Purpose	It is incurred for acquisition of fixed assets for use in business.	It is incurred for running of business.
2	Capacity	It increases earning capacity of the business.	It is incurred for earning profits.
3	Period	Period Its benefit extends to more than one year.	Its benefit is exhausted within the year.
4	Recording	It is debited to related Asset Account	It is debited to related Expense Account.
5	Natue of Account	Nature of it is an Asset Account.	It is an Expense Account.
6	Depiction	It is shown in the Balance Sheet.	It is shown in the Trading or Profit and Loss Account.

Capital expenditure: Any expenditure which is incurred in acquiring or increasing the value of a fixed asset is termed as capital expenditure. As such, the amount spent on the purchase of Land and Building, Plant and Machinery, Furniture etc. is capital expenditure. Such expenditure yields benefit over a long period and hence is written in Assets. Revenue expenditure:Any expenditure, the benefit of which is received during the current year itself is termed as revenue expenditure. As such, all the revenue expenditures are debited to Trading and Profit & Loss Account. Such expenditure does not result in an increase in the earning capacity of the business but only helps in maintaining the existing earning capacity.Diffrence between Capita Expenditure and Revenue Expenditure

	Basis	Capital Expenditure	Revenue Expenditure
1.	Purpose	It is incurred for acquisition of fixed assets for use in business.	it is incurred for runnin of business.
2.	Capacity	It increases earning capacity of the business.	it is incurred for earning profits.
3.	Period	It benifit extends to more than one year	it is incurred for earning profits.
4.	Recording	it is debited to related asset Account.	It is debited to related Expense Account.
5.	Nature of Account	It is an Asset Account.	It is an Expense Account.
6.	Depiction	It is shown in the Balance sheet	It is shown in the Trading or Profit and Loss Account.

1. Preliminary Expenses : Deferred Revenue Expenditure;
2. Purchase of Furniture : Capital Expenditure;
3. Payment of Salary : Revenue Expenditure;
4. Expenses paid for Construction of Building : Capital Expenditure

	Basis of Distinction	Capital Expenditure	Revenue Expenditure
1	Purpose	It is incurred for the acquisition or erection of a fixed asset for use in business.	It is incurred for the day-to-day running of the business.
2	Earning	It is increases the earning capacity of the business.	It is incurred for mantaining the earning capacity.
3	Period	Its benifit extends to more than one year.	Its benifit is exhausted within a maximum period of one year.
4	Accounting Treatment	It is debited to related Asset Account.	It is debited to related Expenses Account.
5	Nature of Account	It is real Account.	It is shown in the trading pr Profit and Loss Account.
6	Presentation	it is shown in the Balance sheet.	It is shown in the Trading or profit sheet Profit and Loss Account.
7	Examples	Purchase of fixed assets like plant and machinary, land and building, furniture etc.	Rent, salaries, repairs,depreciation etc.