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CAPITAL & REVENUE EXPENDITURE
What is capital expenditure in the context of banking and accounting?
Capital expenditure is spending that results in the acquisition of a long-term asset or improvement of an existing asset, thereby providing economic benefits over multiple accounting periods.
What is the primary test to determine if an expenditure is capital in nature?
It must provide enduring benefit beyond one accounting year.
How is revenue expenditure distinguished from capital expenditure?
Revenue expenditure is incurred to maintain the earning capacity of a business and is fully charged to the Profit & Loss Account in the period it is incurred, whereas capital expenditure is capitalised and depreciated over the asset's useful life.
How is revenue expenditure recorded in the financial statements?
It is charged entirely to the profit and loss account in the current year.
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