CAPITALIZATION AND DEPRECIATION

Capitalization and Depreciation

Capitalization and Depreciation

Capital and Revenue Expenditure

Expenditure can be classified into the Capital and Revenue Expenditure:

Capital Expenditure

Capital Expenditure is that expenditure which results in acquisition of an asset and can later be sold and converted into cash or which results in an increasing in the earning capacity of a business. Another test of a capital expenditure is that the benefit of such expenditure lasts for a long period of time (Avery, 2004, Pp. 274).

Following are some of the examples of capital expenditure:

Money paid for purchase of fixed assets e.g. land, buildings, machinery, furniture, patents, etc.

All sums spent ...