The proper distinction between capital and revenue as regard to expenditure, payments, profits, receipts and losses is one of the fundamental principles of correct accounting.
It is very essential that in all cases this distinction should be rigidly observed and amounts rightly allocated between capital and revenue. Failure or neglect to discriminate between the two will falsify the whole of the results of accounting. However, the distinction is not always easy. In actual practice there is a good deal of difference of opinion as to whether a particular item is capital or revenue expenditure. However, the rules mentioned above may serve as a guide for making distinction between capital and revenue expenditure.
Tags : Accounting For Managers - Revenue Recognition
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