capital and revenue expenditure
Chapter notes, video classes, MCQ practice tests and quick-revision one-liners for Accounting and Financial Management for Bankers — JAIIB.
One-liners from this chapter
Free sample — 8 of 65 rapid-fire Q&A cards.
What is capital expenditure?
Capital expenditure is spending that results in the acquisition of a fixed asset or an improvement that extends the useful life or capacity of an existing asset, providing benefits over more than one accounting period.
What is the accounting principle that governs the distinction between capital and revenue expenditure?
The accrual and matching principle governs this distinction.
What is revenue expenditure?
Revenue expenditure is spending incurred in the normal course of business operations whose benefit is exhausted within the current accounting period, such as wages, rent, and repairs.
How is capital expenditure recorded in a bank's balance sheet?
It is recorded as an asset and depreciated over its useful life.
How is capital expenditure treated in the financial statements?
Capital expenditure is recorded as an asset on the balance sheet and written off gradually over its useful life through depreciation or amortisation.
Which financial statement is directly affected by revenue expenditure in the current period?
The Profit and Loss account is directly affected.
How is revenue expenditure treated in the financial statements?
Revenue expenditure is charged entirely to the Profit and Loss Account in the period in which it is incurred, reducing net profit for that year.
Is the purchase of a generator for a bank branch capital or revenue expenditure?
It is capital expenditure as it provides long-term benefit.
Video classes for this chapter
More chapters in Module A - Accounting Principles and Processes
Master the full AFM syllabus
Every chapter of Accounting and Financial Management for Bankers — videos, tests, notes and one-liner decks in one place.