Write the difference between capital expenditure and revenue expenditure?

The major differences between capital expenditure and revenue expenditure are as follows −

Capital expenditureRevenue expenditure
  • Expenditure incurred in enhancing the current one or buying the new one.

  • It’s a long term expenditure.

  • Lump sum amount is required.

  • Amount is capitalized.

  • Reflects in balance sheet.

  • It’s a non- recurring in nature.

  • Improves earning capacity.

  • Expenditure is not matched with capital receipts.

  • Benefit period is more than a year.

  • Have physical presence except for intangibles.

  • Expenditure incurred to run day to day operations.

  • It’s a short term expenditure.

  • Amount is small when compared to capital expenditure.

  • Reflects in profit and loss account (income statement).

  • It’s a recurring in nature.

  • It will maintain the earning capacity.

  • Expenditure is matched with revenue receipts.

  • Benefit period is up to current year.

  • Don’t have a physical presence.

Updated on: 24-Jul-2020


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