How can we identify wheather it is a capital or revenue expenditure. ? Plz explain me in a simple way

Dear Student,
CAPITAL EXPENDITURE:- 1. It contributes to the revenue earning capacity of business over more than one accounting year.
2. These expenses are placed on asset side of balance sheet.
3. It is incurred on purchased fixed asset.
4. For example:- Construction of building. Wheres,

REVENUE EXPENDITURE:- 1. These are incurred to generate revenue for a particular accounting year.
2. These are recorded in Profit and loss account.
3. These are incurred to maintain fixed assets.
4. For example:- Maintainance of building.

Regards

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The difference between capital expenditures and revenue expenditures is essentially the same as the difference between capital expenditures and operating expenses.

Capital expenditures represent major investments of capital that a company makes to maintain or, more often, to expand its business and generate additional profits. Capital expenses are for the acquisition of long-term assets, such as facilities or manufacturing equipment. Because such assets provide income-generating value for a company for a period of years, companies are not allowed to deduct the full cost of the asset in the year the expense is incurred; they must recover the cost through year-by-year depreciation over the useful life of the asset. Companies often use debt financing or equity financing to cover the substantial costs involved in acquiring major assets for expanding their business.

Revenue expenses are shorter-term expenses required to meet the ongoing operational costs of running a business, and thus are essentially the same as operating expenses. Unlike capital expenditures, revenue expenses can be fully tax-deducted in the same year the expenses occur. In relation to the major asset purchases that qualify as capital expenditures, revenue expenditures include the ordinary repair and maintenance costs that are necessary to keep the asset in working order without substantially improving or extending the useful life of the asset. Revenue expenses related to existing assets include repairs and regular maintenance as well as repainting and renewal expenses. Revenue expenditures can be considered to be recurring expenses in contrast to the one-off nature of most capital expenditures.

The purpose of capital expenditures is commonly to expand a company's ability to generate earnings, whereas revenue expenditures are more commonly for the purpose of maintaining a company's ability to operate. Capital expenditures appear as an asset on a company's balance sheet; revenue expenses are listed with liabilities.