Capital and Revenue Expenditures

It is important to distinguish between capital expenditures, which are recorded as assets, and revenue expenditures, which are recorded as expenses. The error of classifying one as the other will have an important effect on net income. The acquisition cost of property, plant, and equipment includes all expenditures that are reasonable and necessary to get such an asset in place and ready for use. Among these expenditures are purchase price, installation cost, freight charges, and insurance during transit.

• Capital Expenditure
• Expenditure
• Revenue Expenditure