How do we identify capital expenditure?

Capital Expenditure is expenditure that results in the acquisition or construction of a fixed asset (land, building, vehicle, furniture or equipment) or enhancement of an existing fixed asset.

capital expenditure

To be an enhancement, work undertaken must either:

  • Lengthen substantially the useful life of the asset
  • Increase substantially the market value of the asset – if the asset were valued after the works it would be valued at a higher value than prior to the works.
  • Increase substantially the extent to which the asset can or will be used for the purpose

Revenue Expenditure is expenditure incurred for the purpose of the organisations daily activity, service/trade or to maintain fixed assets, for example, employees pay, travel expenses, consumables.

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