Accounting Analysis

[Name of the Institute]Accounting Analysis

Difference between the Capital Expenditure and the Revenue Expenditure

The capital expenditure refers to the expenditure or an expense which results in the acquisition of the assets or the increase in the capacity of the earning for the business. On the other hand the revenue expenditure is an expense which is necessary for the maintenance of the earning capacity of the business.

The revenue expenditure effects are temporary as the benefits are being received within the accounting year. In the revenue expenditure there is no acquiring of the assets not the asset value is being increased. It is incurred on the items that are being used by the business therefore the revenue expenditure does not have any physical existence. The revenue expenditure is regular and recurring and thus it occurs repeatedly. This expenditure helps in maintaining the business and it does not appear in the balance sheet and also reduces the revenue. On the other hand the capital expenditure effect is long run because it is not shattered with in the current accounting year as the benefits are being received for the number of the years in the future.

The assets are being acquired in the capital expenditure or the existing value of the asset is being increased. Usually the capital expenditure does have the physical existence, except the intangible assets. It is non- recurring and irregular because it does not occurs again and again while there is the improvement in the performance and financial position of the business because of such expenditure. It does not reduce the revenue of the business and also appears on the balance sheet of the business (Näsi, 2013).

Methods of Depreciation

There are four methods of calculating the depreciation of the fixed assets. These methods are discussed below.

Straight Line Depreciation

Assuming the estimated ...