Capital expenditure and revenue expenditure: Practice Questions

Which of the following is an example of revenue expenditure?

A company owns a warehouse and incurs the following costs during the year:
1. Building an extension for extra storage.
2. Repainting the office walls.
3. Repairing a leak in the roof.
4. Installing a new security alarm system.
Which of these items are classified as capital expenditure?<\/p>

If a business incorrectly treats the purchase of a new computer system as revenue expenditure, what is the impact on the Statement of Financial Position and the Income Statement?<\/p>

Which of the following statements best describes revenue expenditure?<\/p>

Which of the following lists contains only revenue expenditure items?<\/p>

A business incurred the following costs during the year ended 30 June 2024:

1. Purchase of a new delivery van: \( \$22,000 \)
2. Insurance for the delivery van: \( \$1,200 \)
3. Installation of a new security system in the warehouse: \( \$4,500 \)
4. Repairs to the warehouse roof: \( \$800 \)
5. Legal fees for purchasing a new building: \( \$1,500 \)

(a) Classify each of the five items above as either capital expenditure or revenue expenditure.
(b) Explain the importance of correctly distinguishing between capital and revenue expenditure.
(c) If the repairs to the warehouse roof (Item 4) were incorrectly recorded as capital expenditure, state the effect this would have on:
(i) The Profit for the Year.
(ii) The total value of Non-current Assets in the Statement of Financial Position.