>> July 25, 2008
Some time , you would have faced the problem of differentiate any item of business in to revenue and capital . If you are in the home at accounting , you can easily understand these type of problem , but if you are fresher accountant then , now please understand these terms very seriously . Because these terms are so important for you and your business accounts specially final accounts
If any item of business which does not create any asset of business that type of items are called revenue items , suppose we pay rent but rent can not create any fixed asset so this is revenue item and it must show in profit and loss account , but if we have a special fund for building , this fund create long term asset up to that period this will show as fixed liabilities . This is not revenue item .
There is also major difference is that revenue items benefit is related to current year but capital items' benefits are related more than one year .
If advertisement's expense is 100 Rupees and its benefit can only related to current year then this is revenue item . But if we expand Rs. 9000000 lakh on advertisement and its estimated benefit is for 10 years then this will be the capital item.
All revenue item will show in profit and loss account
And all capital items will shown in balance sheet or financial statement .
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