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Capital and Revenue Expenditure
What are the three pillars for classifying expenditure as capital or revenue?
Nature of expense, effect on revenue-earning capacity, duration of benefit.
Define capital expenditure with its primary characteristic.
Expense providing long-term benefit, creates fixed asset, shown in Balance Sheet.
What is revenue expenditure? State its lifespan.
Benefit not available beyond 12 months, recurring, fully charged to P&L.
What is deferred revenue expenditure (DRE)? Why is it called fictitious?
Revenue expense with multi-period benefit; fictitious because no realisable value exists.
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