A Concise Look Into Capitals and Revenues in Accounting

Looking for accounting assignment help online is typical behaviour among accounting students. With the plethora of assignment mushrooming all over Melbourne city, it is hard to discern the good from the bad.

The necessity of online assistance can be mitigated drastically if students perform thorough revisions of accounting concepts. Revisions strengthen one's subject knowledge and prepare them for more demanding tasks.

This informative write-up dwells into the critical concepts of capital and revenue expenditures & receipts of a business.

What Are Business Capital And Revenue Expenses?

 A business must analyze all transactions periodically to determine whether it's of capital or revenue nature.

• Capital Expenses are the expenses that a business incurs to generate enduring benefits and draw more revenue over more than one accounting period. On the other hand, revenue expenses are those that a business needs to carry out to support the revenue-generating functions.

The benefits of capital expenses extend over more than one accounting period. In the case of revenue expenses, the benefits do not extend beyond a single accounting period.

•  Capital expenses belong to an accounting balance sheet's asset section as they generate benefits over a more extended period. They are added to the profit & loss section of the year ending balance sheet based on the benefit's utilization in that particular year.

Revenue expenses are always part of the profit and loss section of the sheet.

Technological advancements now allow accountants to use accounting software like MYOB and SPSS to manage accounting operations, such as building balance sheets.

Here are some illustrations on capital and revenue expenses that can help one score better in their accounting assignments without any help.

Problem 1:

Grand Pictures Ltd. constructed a cinema house and incurred the following expenditures during the first year ending 24^th March 2019.

• Second-hand furniture worth 00 was purchased; repainting of the pieces of furniture costs $ 1000. Furnitures were installed by own workmen, wages for this being 0.
• Expenses for obtaining a license for running the cinema worth 000. During the year, the company was also fined 00 for contravening rules. Renewal fees 00 also paid for the next year.
• Fire insurance 00 was paid on 1^st October 2018 for one year.
• Temporary housing was constructed, costing 00. They were necessary for the construction of the cinema and demolished after completion.

Classify the above items as applicable.

Solution:

• The total cost of the furniture must be treated as 200. It is a capital cost since it contributes to the proper functioning of the cinema.
• License payments for running the cinema house is a capital expense. But the fine of 00 is a revenue expenditure since its benefits are applicable only in that fiscal year. The renewal fee is also a revenue expenditure but a prepaid expense.
• Half of the insurance premium pertains to the fiscal year beginning on 1^st April 2016. Thus it is a prepaid expense, and the rest is revenue expense.
• Since the temporary housing was necessary for the construction of the cinema house, they are considered capital expenses.

And that's all the space we have for today! Let's hope this article helps you score well in your accounting assignments. Put in your hard work, make your progress, and get help from the best accounting assignment help service in Melbourne in case of unforeseen challenges. All the best!

About This Author

Nathan William Myself, Nathan William is a professional writer. Joined: October 29th, 2018