6 Difference Between Capital and Revenue Expenditure

Capital and Revenue Expenditure are categorized according to their duration. Capital expenditure is the expenditure which is done to increase the assets and maintain the existing assets. While revenue expenditure is the expenditure which is used to run the day to day operations of a business.

Both capital and Revenue Expenditure are very important to increase the company growth and the lifetime of the business. There are many differences between capital and revenue expenditures. It is very important to properly understand capital and Revenue Expenditure. In this article we will discuss in detail about the capital and Revenue Expenditure. We will also discuss the difference between the capital and Revenue Expenditure and other terms and aspects which are related to the capital and Revenue Expenditure.

Capital vs Revenue Expenditure

Sr. No.	Capital	Revenue
1	Used to purchase new assets or for the maintenance of old assets.	Used to run the routine operation and expenses.
2	Benefits remain for a long time	Benefits remain for a short time period.
3	Huge amounts	Small amounts
4	Main purpose is to increase the growth and revenue of the company.	Main purpose is to maintain the daily profit.
5	Shown in the profit and loss account.	Shown in the balance sheet.
6	Purchasing of equipment, machinery, copyright, building and properties.	Salary of the staff, insurance, taxes and maintenance of the assets.

Capital expenditure

Every businessman wants to increase the value of their company and business it is only possible with increasing the value of the fixed assets and purchase new assets which increases the production and the sell. The total money which is used to purchase, maintain or update the assets is known as capital expenditure. Long term and big assets of the firm is known as the capital of the company. Capital expenditure leads to increased revenue also. For example.

Ravi have a company which produces cars. In one year, company produces 20K cars. Ravi updated his plant with new equipment and increased the storage capacity. In this he manufactures 30k car in one year. This leads to increased revenue.

Capital expenditure is done at one time and its benefits remain for many years. Capital expenditure includes updating the equipment, increasing storage capacity of the company, purchase of trucks to transport the materials, purchases buildings and properties etc. are the examples of the capital expenditure.

Characteristics of capital expenditure

1. Main focus is to purchase the new assets or upgrade the old one to increase revenue.
2. Increase the revenue generation.
3. Benefits remains same for many years
4. All the purchased assets only for business not for sale.

Revenue expenditure

Every firm and business have their day to day expenses. The money which is used to pay is known as the revenue expenditure. These are the short-term expenditures. These expenses like maintenance of the assets, salaries, office experience and utilities expenses.  Revenue expenditure is very less or small from the capital expenditure.

Revenue expenditure are used or consider in the financial year. Their benefits also remain for the short times. For example, someone has e company with 20 staff. For the routine work he has to pay the salary of the 20 staff, electric bill, utilities bills, maintenance of the office and rent of the building. All the expenses are known as the revenue expenditure.

Characteristics of the revenue expenditure

1. Maintained the routine works of the business.
2. It helps to maintain the revenue of the business.
3. It is recurring in nature.
4. It’s a small amount.
5. Benefits remain only for some time.

Main differencee between capital and Revenue Expenditure.

1. Capital expenditure is used to purchase new assets or for the maintenance of old assets. Revenue expenditure is used to run the routine operation and expenses
2. Benefits remain for a long time in capital expenditure. In revenue expenditure benefits remain for a short time period.
3. Capital expenditures are huge amounts. Revenue expenditure is not very big.
4. Capital expenditures main purpose is to increase the growth and revenue of the company. While revenue expenditure’s main purpose is to maintain the daily profit.
5. Revenue expenditure is shown in the profit and loss account. While capital expenditure is shown in the balance sheet.
6. Examples of capital expenditure are purchasing of equipment, machinery, copyright, building and properties. Revenue expenditure salary of the staff, insurance, taxes and maintenance of the assets.

Conclusion

Capital and Revenue Expenditure are very important for the business growth. Capital expenditure increases the value and the worth of the company and business. While revenue expenditure is very important for running of the daily operations and works. Companies and businesses run with the staff and staff only works for the money. So, the revenue expenditure is very important to run the company and production of the products.

This is all about the capital and Revenue Expenditure. Hope this article will be helpful for you. If you have any doubts please feel free to comment on us. For more interesting topics like this please go through the over website.