By: Jaylene Thompson
Checkpoint: Write a summary explaining the differences between revenue expenditures and capital expenditures during a useful life and identifying any similarities. Briefly explain the entries of revenue expenditures and capital expenditures.
The difference between revenue expenditures and capital expenditures is that revenue expenditures are expenditures that are immediately charged against revenues as an expense (Weygandt, Kimmel, & Kieso 2010 pg. 409). Also capital expenditures are expenditures that increase the company’s investment in productive facilities (Weygandt, Kimmel, & Kieso 2010 pg.409).
After reading chapter nine I found out that “a company may incur cost for ordinary repairs, additions, and or improvements” this is considered expenditures during a useful life. You have ordinary repairs and you have additions and improvement. Ordinary repairs are expenditures that are used to maintain the operating efficiency and productive life of the unit (pg.409). Additions and improvements are costs incurred to increase the operating efficiency, productive capacity, or useful life of a plant (pg.409). Additions and Improvements they increase the company’s investment in productive facilities, and keep the business operating. This is referred to as capital expenditure.
The entries of revenue expenditure would be like for a company if the business needed to repair a truck they have to pay cash to get the vehicle out of the shop. Or the company has to put brakes or tires on the truck, you pay the bill now. These repairs are recorded as debits to Repair (or Maintenance) expense as they incurred, these debits are paid immediately. Capital expenditure is when something is added on or improved to help increase the company’s investment. When something is being done to help improve the business this is going to bring in some revenue and that is money for the...