Capital vs revenue income and expenditure

All business expenditure must be classified as either capital or revenue income and expenditure. Lets take a look at what each of these two different headings mean and how they are different.

The video covers the different headings and why something would be included under each.

Capital expenditure

This is the purchase or improvement of non-current assets. For example, buying a piece of machinery, or removing single-glazed windows and replacing them with double-glazed windows.

Revenue expenditure

This is the day-to-day running costs and expenses of the business, including the repair and maintenance of non-current assets. For example, gas and electricity bills, rent and rates.

Capital income

This is income received from the sale of non-current assets of the business, such as the proceeds received from selling a motor vehicle.

Revenue income

This is income received from the sale of goods or services – trading activities. In other words, the proceeds received from selling goods (inventory or stock).