1. YEAR 11 ACCOUNTING CAPITAL EXPENDITURE REVENUE EXPENDITURE

2. EXPENDITURE There are TWO kinds of expenditure: Capital Expenditure Capital Expenditure Revenue Expenditure Revenue Expenditure

3. CAPITAL EXPENDITURE Capital Expenditure Expenditure that creates an asset or improves an asset. Does extra spending in Asset affect Owner’s Equity NO, Capital Expenditure does NOT affect Owner’s Equity

4. Capital Expenditure cont’d Capital Expenditure includes: Purchase of a property, plant and equipment (for example: buying a new computer) Purchase of a property, plant and equipment (for example: buying a new computer) Improvements to assets to increase its performance or extend its useful life (for example: installing extra RAM to increase its performance) Improvements to assets to increase its performance or extend its useful life (for example: installing extra RAM to increase its performance)

5. Capital Expenditure cont’d The cost of capital expenditure includes: Cost of Fixed Asset Cost of Fixed Asset Delivery Cost from the suppliers to the business Delivery Cost from the suppliers to the business Insurance while transit Insurance while transit Installation cost – including labour Installation cost – including labour Materials in trial runs Materials in trial runs Any other costs that get the asset into performance state. Any other costs that get the asset into performance state.

6. REVENUE EXPENDITURE Revenue Expenditure is any expenditure that: Occurs for day-to-day operation. Occurs for day-to-day operation. Has a recurring nature (happens more than once). Has a recurring nature (happens more than once). Helps the entity to earn income from its assets (for example, spending on petrol helps to move the delivery vehicle). Helps the entity to earn income from its assets (for example, spending on petrol helps to move the delivery vehicle). Reduces EQUITY. Reduces EQUITY.

7. Example For a courier business Purchase of a delivery vehicleCapital Expenditure Sign printed on delivery vehicle Revenue Expenditure Cost of installing new engine in the vehicle Capital Expenditure Petrol Revenue Expenditure

8. Another Example For a hairdresser business Insurance of transiting new computer Capital Expenditure Wages paid to hairdressers Revenue Expenditure Repairs to EquipmentRevenue Expenditure Install a piece of computer chip that fastens the cutting process Capital Expenditure