Professional Documents
Culture Documents
Increase Expenses
Decrease Net Profit
Decrease Expenses
Increase Net Profit
Pg . 25
Capital Expenditure
Revenue Expenditure
Buildings
cost of building
cost of extension
carriage on raw materials used
the new building
legal fees
labour cost of own employees
to build new premises
installation of utilities in the new
premises e.g. water and electricity.
general maintenance
repairs
redecoration
Vehicles
fuel
road licence
painting company logo
insurance
servicing and repairs
Computers
Pg . 26
discs
printing paper
insurance
low cost computer programmes
Exercises
1a.
1b.
2.
3.
Pg . 27
4.
Joe Psaila bought a new computer for his office on 1 May 1999. The
computer cost Lm2,500, and he paid an installation charge of Lm100.
He also paid Lm900 for software for the computer. He agreed to pay
Lm300 for an agreement covering his computer for repairs and
maintenance for three years from 1 May 1999.
During the year ended 30 April 1999, he paid wages of Lm12,000 to his
computer operator, and he estimates that the power used by the
computer cost Lm20.
You are required to:
a.
List the items given above as either Capital Expenditure or
Revenue Expenditure;
b.
Give two reasons for the importance of correctly distinguishing
between the two types of expenditure.
5.
6.
Pg . 28