DEPARTMENT OF TECHNICAL

EDUCATION ANDHRAPRADESH
Name : N. USHA RANI
Designation : Lecturer
Branch : Commercial & Computer
Practice (CCP)
Institute : GPW/Guntur
Year/Sem : III Sem
Sub-Code : CCP-302
Subject : Accountancy-II
Topic : NON-TRADING CONCERNS
Duration : 50 minutes
Sub Topic : Capital Expenditure &Capital
Receipts
Teaching Aids : PPT, ANIMATIONS
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Objective

At the end of the Period, you would be able to:

 Understand the terms
 Capital Expenditure
 Capital Receipts

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Recap

In the previous class we have already learned

 Meaning of Trading & Non Trading Concern
 Differences between Trading & Non Trading
Concern

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Meaning of Payment & Expenditure

Payment & Expenditure

 Payment means Actual Cash Paid
 Payment can be made for Current , past or Future
Period

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Expenditure Differs from Payment
 A Payment may be expenditure . But expenditure need not
necessarily be a Payment
 Expenditure includes all expenses incurred whether paid or
not
 But payment is that amount which is actually paid
 For Example:
 Amount paid for purchasing an asset is Payment
 Amount paid for wages is an Expenditure

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Capital Expenditure
 This Expenditure Incurred for Acquiring the
Permanent Assets
 This Expenditure intended to benefit periods
Beyond the Current Financial Year

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Capital Expenditure contd

 Results in increase the capacity of the existing

Fixed Assets
 Results in efficiency of the existing Fixed Asset
 Results in prolonging the life or economy of
operation of the existing Fixed Assets

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Examples of Capital Expenditure

 1.Cost of Acquisition of Permanent Assets

 Example:-
 Land & Building, Machinery, furniture
 Goodwill, patents, Trade Mark, Design, patterns
 loose tools and other Equipments , Hospital
Equipment, Research Equipment Etc.,
 Sports goods ,Library Books, Investments,

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Examples of Capital Expenditure
 2. Cost of installation of Fixed Assets and of Light
and Fans etc.,
 3. Cost of Addition , Expansions, improvements or
alterations of Fixed Assets
 4. Cost of Development , Research and
Experiment

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Income Means
 Money Earned whether Actually Received or Not
 Income is always related to a time Period

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Meaning of receipts

A receipt is
 Actual Cash Received
 may be Received for any Period
 may be for the Past , Present ,or Future
 may be Capital or Revenue in Nature

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Meaning of receipts

 A receipt is different from income

 Receipt may be of capital or revenue nature
 Cash received for any period is a receipt
 But income is money earned whether actually
received or not
 Income earned in Past, called Income of the Past
but not of the present period even though actually
received during the Current period

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Capital Receipts

 These are Receipts by sale of property

 These are of permanent nature receipts
 These receipts are capitalized
 These receipts are not to be used to meet current
Expenditure
 They are not Recurrent in nature

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Summary

We have discussed about

 The meaning of Capital Expenditure
 and Capital Receipts

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Quiz
1. Overhauling Expenditure on the entire Plant in a
big factory which results in adding to its life is

a) Capital Expenditure
b) Capital Receipt
c) Deferred Expenditure
d) Revenue Expenditure

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1. Heavy Legacy Expenses is a

a) Capital Expenditure
b) Capital Receipt
c) Deferred Expenditure
d) Revenue Expenditure

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1. Cost of Experimenting a Product is

a) Capital Expenditure
b) Capital Receipt
c) Deferred Expenditure
d) Revenue Expenditure

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Frequently Asked Questions
1. Define Capital Expenditure and Give Five
Examples for each
2. What is Capital Receipt
3. Distinguish between
a) Receipts and Income
b) payment And Expenditure

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