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Long-term assets are those which will be kept in the entity for more than one year.
Capital expenditure is not charged as an expense in the income statement (although a 'depreciation'
charge will usually be made to write off the capital expenditure gradually over time; depreciation
expense is shown in the income statement).
Capital expenditure on long-term assets appears in the balance sheet.
Definition
Revenue expenditure: Expenditure which is incurred either
For trade purposes. This includes purchases of raw materials or items for resale, expenditure on
wages and salaries, selling and distribution expenses, administrative expenses and finance costs, or
To maintain the existing earning capacity of long-term assets.
Revenue expenditure is charged to the income statement of a period, provided that it relates to the trading
activity and sales of that particular period.
Capital expenditure can include costs incurred in bringing a long-term asset to its final condition and
location, such as legal fees, duties and carriage costs borne by the asset's purchaser, plus installation costs.
Repair, maintenance and staff costs in relation to long-term assets are revenue expenditure.
Definition
Capital income: Proceeds from the sale of non-current assets.
The profits (or losses) from the sale of long-term assets are included in the income statement for the
accounting period in which the sale takes place. For instance, the business may sell machinery or property
which it no longer needs.