What is meanning capital expenditure & ravenue expenditure?

A captial expenditure is an amount of money used during a particular period to acquire or improve long term assets such as property, plant, or equipment.

A revenue expenditure is an expenditure made on recurring items, including the running of services and financing capital spending that is paid for by borrowing.

A.L.

Read the accounts book of 'B.com'

Capital expenditures ("CAPEX") are expenditures used by a company to acquire or upgrade physical assets such as equipment, property, industrial buildings. In accounting, a capital expenditure is added to an asset account (i.e. capitalized), thus increasing the asset's basis (i.e. the cost or value of an asset as adjusted for tax purposes).

An ongoing question of the accounting of any company is whether certain expenses should be capitalized or expensed. Costs that are expensed in a particular month simply appear on the financial statement as a cost that was incurred that month. Costs that are capitalized, however, are amortized over multiple years. Most ordinary business expenses are clearly either expensable or capitalizable, but some expenses could be treated either way, according to the preference of the company.

What is and what is not capital expenditure has taxed the minds of judges, tax advisors, Inspectors, business people and others for more than two centuries. No one has produced a single simple test that will determine the issue in all circumstances. A variety of judicial pronouncements has resulted in recipes that are applicable to particular circumstances but which lead to inconclusive or even incorrect results in others. As the body of case law has expanded the margins of uncertainty have retreated. But those margins remain to this day. Resolving a case on the borderline is far from easy. The various judicial recipes may point to conflicting conclusions. You will have to come to a balanced judgement. To do so you will need to establish the relevant facts that applied at the time the expenditure was incurred.

The day-to-day running costs of a business (staff wages, purchase of trading stock, rent of business premises, and so on) are referred to as revenue expenditure. Revenue expenditure is sometimes described as circulating capital. This description reflects the fact that the capital in question leaves the ownerвЂ™s possession (changes masters) to produce profit or loss. The capital may be considered as being 'turned over'. In the process of turning over, profit or loss ensues.

Capital expenditure (goodwill, the purchase of business premises, plant and machinery used in the business process and so on) in practice is the opposite of revenue expenditure.

The profit making structure within which the business is conducted is sometimes called the fixed capital of the business. A trader does not part with the fixed capital (there is no changing of masters); it is retained and not turned over in the same way as circulating capital. The fixed capital provides the opportunity for the business to make profits or losses.

It is important that you recognise at the outset that there is no requirement of symmetry. A sum that represents capital expenditure in the hands of the payer is not thereby a capital receipt in the hands of the recipient. It depends on the nature of the trade.

The capital/revenue distinction also applies in the context of whether a receipt is a taxable receipt of the trade, and the same principles apply.

http://mod.nic.in/echs/CORRIGENDUM/9sept03-apndx-VI.htm

capital expenditure = expenditure incurred in earning income or to assist in earning income for a long period of time.It is incurred to increase the earning capacity of a business

Revenue expenditure = recurring expenditure incurred for running and maintenance of a business

Capital is a reference to fixed assets like equipment, buildings and land. A revenue expense is most appropriately associated with the normal operating budget.

When an expenditure is incuured for purchase of fixed assets like Plant & Machinery, Land & Buildings, Furniture, etc. it is called Capital expenditure (CAPEX). The capex is incuured for generating revenue. The benefit from this is expenditure doesnt lost for less than one year and these items are reflected in the Balance sheet of the company as application of funds.

Whereas Revenue expenditure is that which is incurred for running the business of the company. The benefit from this expense is consumed within the year in which it is incurred. These appear as items in P&L account and are charged against the profits of the company. Eg: General. Administrative, Selling and distributution. These are of 2 types. cash items and non cash items.

Cash items: Advertisement, Legal charges etc.
Non cash items: Depreciation, Loss on sale of assets, etc.

Better refer to statutory provisions on the issue under Income tax on the link below:
http://www.allindiantaxes.com/income-tax-income-tax-act.php
Also refer to news on the link below which will be of interest to you:
http://www.allindiantaxes.com/ait-news-26.php
Admission fee & infra dev paid to exchange is Revenue Expenditure: HC
AIT News Network
MUMBAI. Deciding a contentious issue in favour of share brokers it has been ruled by High Court that admission fee as well as contribution to infrastructure development paid by the assessee to become a member of the stock exchange is revenue expenditure.
HC ruled as under:
The test of enduring benefit is not a certain or conclusive test and it cannot be applied blindly and mechanically without regard to the particular facts and circumstances of a given case.
In the present case, no new assets had been created and there is no addition to or expansion of the profit-making apparatus of the assessee. Payment of admission fee as well as contribution to infrastructure development is like nature of license fee and it is paid only for carrying on the business.
If any payment is made for the purpose of running the business effectively and efficiently, it is only a revenue expenditure.
By becoming a member, the assessee is permitted to make use of the facility provided in the Stock Exchange and hence it is only revenue expenditure.
( Click here for full text of ruling AIT-2006-181-HC )

Capital expenditure are normally fixtures and fittings, ie, desks, buildings, computers, etc,,,

A capital expediture would be money spent on something like buildings, equipment or large furniture. A revenue expediture would be something in the course of everyday business like office suppies or payroll.

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