Explain the Difference Between Capital and Revenue Items of Expenditure and Income
Before we explain the difference between capital and revenue items of expenditure and income, we must know that transactions can be divided into two types according to period of time. Long Term Period Long-term period means more than one year and short term period means less than or equal to one year. Transactions having long term period of time are Capital Transactions. Office Furniture, Machinery, Building purchased are examples of Capital Transactions. Short-term period Transactions having short term period of time are Revenue Transactions. Examples are Rent paid, Average Salary of an employee paid, fees received, stationary purchased.etc. As we know expenses in accounting are incurred for the purpose of generating revenues and revenues accounts are calculated by taking the differences between profit and expenses, so Expenses and Revenues (Income) are basically two types of accounts and both are two different types in nature. So Ca...