Session Plan : Capital and Revenue expenditure

Introduction (5 min): Define Capital Expenditure vs Revenue Expenditure with simple examples.

Characteristics (10 min): Explain features, purpose, and accounting treatment of both.

Illustrations (15 min): Work out examples (purchase of machinery, repair costs, salaries, etc.).

Class Activity (10 min): Students classify given expenses as Capital or Revenue.

Recap & Q/A (5 min): Summarize differences and clarify doubts.

Lecture Material : (PDF, PPT)

Capital_and_Revenue_Expenditure.pptx 

Learning Material (IV Quadrant Approach)

(Q1) : Text and Image based Content (PDF/Image Formats)

Capital and Revenue Expenditure

1. Meaning

Capital Expenditure

• Money spent to acquire, improve, or extend the life of an asset.

• Benefits extend over multiple accounting periods.

• Recorded in the Balance Sheet (Asset side), not in Profit & Loss A/c.
  
  

Revenue Expenditure

• Money spent for day-to-day business operations.

• Benefits are short-term, usually within the same accounting year.

• Recorded in the Profit & Loss A/c (Expenses side).

2. Characteristics

Capital Expenditure

• Long-term benefit.

• Increases earning capacity of business.

• Examples: Purchase of building, machinery, land, patents, etc.
  
  

Revenue Expenditure

• Short-term benefit.

• Maintains earning capacity of business.

• Examples: Rent, salaries, wages, electricity, repairs, advertising, etc.

3. Accounting Treatment

• Capital Expenditure → Shown in Balance Sheet under assets.

• Revenue Expenditure → Debited to Profit & Loss Account as expense.

4. Examples

Example 1

• Purchase of machinery ₹5,00,000 → Capital Expenditure (asset).

• Installation charges of machinery ₹50,000 → Capital Expenditure (included in asset cost).

• Repairs of machinery ₹20,000 → Revenue Expenditure (day-to-day expense).

Example 2

• Salary paid to employees ₹40,000 → Revenue Expenditure.

• Wages paid for building construction ₹1,00,000 → Capital Expenditure (added to building cost).

• Legal fees paid for acquiring land ₹30,000 → Capital Expenditure.

Example 3 (Mixed Case)

• Company purchases furniture ₹60,000 (Capital).

• Spends ₹5,000 on polishing the furniture after one year (Revenue).

5. Importance of Classification

• Correct classification ensures true financial reporting.

• Helps in accurate profit calculation.

• Prevents manipulation of profits by wrongly treating expenses.

• Provides better information for decision-making.

(Q2) : Video Based Content (Youtube): www.youtube.com/watch?v=hU8fZTXdLAE 

www.youtube.com/watch?v=8EygTKadwBM 

(Q3) : Formative Assessment (Google Form/Any Other Online Quiz Platform): forms.fillout.com/t/uTntfPXQj8us