TRINITY INSTITUTE OF PROFESSIONAL STUDIES

Sector – 9, Dwarka Institutional Area, New Delhi-75Affiliated Institution of G.G.S.IP.U, Delhi

B.COM(H)FINANCIAL STATEMENTS

888101

BY: NAMRATA YADAV

TRINITY INSTITUTE OF PROFESSIONAL STUDIESSector – 9, Dwarka Institutional Area, New Delhi-75

CLASSIFICATION OF CAPITAL AND REVENUE EXPENDITURE AND RECEIPTS

• EXPENDITURE:

• RECEIPTS:

An expenditure is a payment in cash or barter credits, or the incurrence of a liability by an entity, in exchange for goods or services. Evidence of the documentation triggered by an expenditure is a sales receipt or an invoice .

Receipts means receiving any kind of income or earnings in return of something.

TRINITY INSTITUTE OF PROFESSIONAL STUDIESSector – 9, Dwarka Institutional Area, New Delhi-75

CLASSIFICATION OF EXPENDITURE EXPENDITURE

CAPITAL EXPENDITURE

REVENUE EXPENDITURE

DEFFEREDREVENUE

EXPENDITURE

TRINITY INSTITUTE OF PROFESSIONAL STUDIESSector – 9, Dwarka Institutional Area, New Delhi-75

CAPITAL EXPENDITURE

MEANING: Capital Expenditure is the money spent on the purchase of permanent or fixed assets for use in the business for long period and not for immediate resale or on the permanent improvement of or addition to or extension of an existing asset with a view to increase the earning capacity of the enterprise.

BENEFITS: It normally yields benefits beyond current accounting period.

ACCOUNTING TREATMENT: It is debited to respective asset accounts.

TRINITY INSTITUTE OF PROFESSIONAL STUDIESSector – 9, Dwarka Institutional Area, New Delhi-75

CAPITAL EXPENDITURE

DISCLOUSRE IN FINANCIAL STATEMENTS: It is disclosed on the asset side of the Balance Sheet.

EXAMPLES: (a) purchase of tangible fixed asset such as land, plant and

machinery. (b) purchase of intangible fixed asset like goodwill, patent. (c)investment in shares of other companies for long period .

TRINITY INSTITUTE OF PROFESSIONAL STUDIESSector – 9, Dwarka Institutional Area, New Delhi-75

REVENUE EXPENDITURE

MEANING : It is an expenditure which is incurred- (a) to maintain the productivity or earning capacity of a

business (b) to carry out operating activities in the normal course of

business BENEFITS: It normally does not yield benefits beyond current

accounting period ACCOUNTING TREATMENT : It is debited to respective

expenses account

TRINITY INSTITUTE OF PROFESSIONAL STUDIESSector – 9, Dwarka Institutional Area, New Delhi-75

REVENUE EXPENDITURE

DISCLOUSRE IN FINANCIAL STATEMENTS : It is disclosed on the debit side of income statement.

EXAMPLES : (a) Cost of finished goods or raw materials used in

manufacturing(b) Administrative costs like salaries, wages(c) Establishment costs such as rent, rates, light, repairs

TRINITY INSTITUTE OF PROFESSIONAL STUDIESSector – 9, Dwarka Institutional Area, New Delhi-75

DEFFERRED REVENUE EXPENDITURE

• MEANING : There are certain expenditures which are primarily revenue in nature but the benefit from which is consumed in the year in which the expenditure is incurred. Such expenditures are called deferred revenue expenditure. Such expenditures are carried forward are carried forward over a number of accounting periods during which the business is expected to benefit from the same.

• ACCOUNTING TREATMENT : Normally such expenditure should be written off over a period of 3 to 5 years.

TRINITY INSTITUTE OF PROFESSIONAL STUDIESSector – 9, Dwarka Institutional Area, New Delhi-75

DEFFERRED REVENUE EXPENDITURE

• DISCLOUSRE IN FINANCIAL STATEMENTS : It is disclosed as deferred revenue expenditure written off on debit side of income statement.

The unwritten part is shown on asset side of Balance Sheet as Deferred Revenue Expenditure.

• EXAMPLES : (a) preliminary expenses (b) heavy advertising

TRINITY INSTITUTE OF PROFESSIONAL STUDIESSector – 9, Dwarka Institutional Area, New Delhi-75

CLASSIFICATION OF RECEIPTS

CAPITALRECEIPTS

REVENUE RECEIPTS

RECEIPTS

TRINITY INSTITUTE OF PROFESSIONAL STUDIESSector – 9, Dwarka Institutional Area, New Delhi-75

CAPITAL RECEIPTS

MEANING : Capital receipts are contributions into the business by proprietor, partners or shareholders towards the capital of the firm and also any fixed assets of a business enterprise.

ACOUNTING TREATMENT: These are credited to the respective account of capital nature.

EXAMPLES: (a) sale of land & building by a person other than a property dealer

(b)raising of loan

TRINITY INSTITUTE OF PROFESSIONAL STUDIESSector – 9, Dwarka Institutional Area, New Delhi-75

REVENUE RECEIPTS

• MEANING : Revenue receipts are those receipts which arise in the normal course of business.

• ACCOUNTING TREATMENT : These are credited to respective revenue account.

• EXAMPLES : (a) sale of land & building by a dealer in real estate.

(b) sale of shares by a dealer in securities .