expenditure? You may click the link to find Multiple choice questions (Q.No-1 to 10) on Capital and Revenue Receipts and Payments.. paying for materials, staff costs) which is known as "revenue expenditure".The distinction between capital and revenue expenditure is quite an important one. The expenditure incurred for availing loan was held to be allowable u/s 37(1)of the Act. The differences between capital expenditures and revenue expenditures include whether the purchases will be used over the long-term or short-term. 3. How to account for capital expenditure and revenue expenditure. The dispute related to the sums transferred by the assesse-company to trustees to take an annuity policy for the managing director. To keep pace with the requirements and ensure product saleability, software development companies have to constantly incur expenditure to upgrade, improve and remove problem areas of the software. The procurement department purchased the fixed assets from an approved supplier and intimated the finance department about the transaction which carried the total costs of the acquired asset to balance sheet of the company. Worksheet-1: Capital and Revenue Expenditure 3. Incorrect treatment of expenditure . Depreciation on furniture, equipment, plant, machinery and other fixed assets. There should be no possibility of funds forming a part of the funds of the assessee. In pursuance of this, the company executed a trust deed in favour of three trustees to whom it paid a lump sum of Rs 8,208 and further undertook to pay annually Rs. What is a capital expenditure versus a revenue expenditure? Capex approval processes are not fully deducted during the accounting period they were incurred in, but rather depreciated to spread this cost over the useful life of the asset. Material Facts About Johnâs Prepaid Rent. A capital expenditure is an amount spent to acquire or significantly improve the capacity or capabilities of a long-term asset such as equipment or buildings. They are expensed out when incurred and are not made part of the balance sheet but rather shown in income statement of the company. Revenue expenditure is taken into account while computing taxable profits and would be eligible for a tax deduction whereas on capital expenditure only depreciation can be claimed. 1106 OF 1964, Supreme Court (cited +411 times). Suppose, the JKL company hired a professional bug exterminator firm to get rid of all the insects manifesting in their production facilities. The court held that the assessee has to employ professionals whose job is to continuously upgrade the software and provide newer features and updates on are gular basis. Receipts and invoices keep the records of expenditures. 43 OF 1975, Supreme Court (cited +410 times). The question about the nature of expenditure has always been a highly contested issue in tribunals and courts in India. Questions from 1 to 10. Thanks For This, Copyright 2012 - 2020. Accordingly, the expenditure was held to be revenue expenditure. Capital expenditure: It refers to the amount spent on acquiring, maintaining, and improving the fixed assets that increases its productivity or extends useful life. Day-to-day expenses incurred by the company. This was not covered by insurance. The members of association entered into an agreement restricting the number of working hours per week to run their looms. Also Read: Can deduction u/s 80-IA be claimed if the contract is awarded to Joint Venture formed by the assessee? In the said case, assesse was a company carrying on the business of manufacture of jute and was a member of Indian Jute mills association. These tests are generally efficacious and serve as useful servants; but as masters they tend to be over-exacting.”, ITA 254 of 2013, Delhi HC (cited +720 cases). Every expenditure has its own purpose from the business point of view and the classification between the capital expenditures and revenue expenditures is the most regular common problem for accountants since it has a significant impact on financial statements. This Explanation Very Useful to me. Characterising an expenditure as revenue or capital has tax implications. Here, we have discussed most important cases explaining the concept of expenditure. However, some broad and general tests have been suggested from time to time to ascertain on which side of the line the outlay in any particular case might reasonably be held to fall. For example, carriage, office, admin, and stationary expenses e.t.c. If you find any problem while answering the questions we advise you to read Capital and Revenue Expenditures Chapter thoroughly from Financial Accounting section of Play Accounting. Any expenditure on the fixed asset after it has been used for a while is treated as Revenue Expenditure eg repairs to the computer; electricity costs. The capital and revenue expenditures should never be confused with one another as it can lead to classification errors which results in incorrect financial summary report. The budget was approved for the purchase of new plant. In accounting and finance these expenditures are also termed as CapEx. (c) Capital expenditures (d) Revenue expenditures 19. Revenue expenditure: It refers to the amount spent on normal maintenance and repairs of fixed assets to generate revenue in the current period. (e) Revenue Expenditure = The expenditure is related to purchase of goods for resale, which itself is a revenue expense, therefore, carriage is also a revenue expense. It provides benefits only in the current period. The term is generally restricted to expenditures that add fixed assets or that has the effect of increasing the capacity, efficiency, life span, or ⦠The director was alive then and it was not known whether any pension would be payable to him at all. The purchase of loom hours did not create any new assets nor was there any expansion of the factory. The money was placed in the hands of trustees and/or the insurance company to purchase annuities of different kinds, if required, but to be returned if the annuities were not bought and the setting apart of the money was not a paying out or away of these sums irretrievably.â, Empire Jute Co. Ltd. vs.Commissioner Of Income Tax, Civil appeal no. The benefits of revenue expenditures usually expire within one financial year and their budget is smaller as compared to capital expenditures. (a) Capital expenditure (b) Revenue expenditure Capital expenditure is an expenditure intended to benefit future periods, in contrast to revenue expenditure. Failure to make distinction between capital and revenue items will result in A] under trading 4,364 for six years. is treated as capital expenditure. Usually the cost is recorded in a balance sheet account that is reported under the heading of Property, Plant and Equipment. Expenditure is a transaction, which is paid out and has gone irretrievably from the pockets of an assessee. Deductions for Co-operative Societies: 5 questions and their answers, Peripheral Development Expenditure as part of CSR to be considered revenue expenditure | Riverus, DCIT vs BMR Business Solutions Pvt. Classification of these transactions reflects in the final statements of the company. If a business wishes to grow, it needs to invest.. It was held that this payment by the company was contingent and therefore not deductible for income tax purposes. 2,500 spent on the overhaul of machines purchased second-hand. A capital expenditure (âCapExâ for short) is the payment with either cash or credit to purchase long term physical or fixed assets used in a businessâs operations. The trustees were to spend this sum to take an annuity policy for the managing director. Distinguish between capital and revenue expenditure 2. Capital and revenue expenditures Quality Move Company made the following expenditures on one of its delivery trucks: Prepare journal entries for each expenditure. (d) Capital Expenditure = Purchase of business means purchase of its assets and liabilities; therefore, it is a capital expenditure. Solved Example and Problem 2: Can deduction u/s 80-IA be claimed if the contract is awarded to Joint Venture formed by the assessee? Enjoy the videos and music you love, upload original content, and share it all with friends, family, and the world on YouTube. I am going to recommend it to my students. The test of enduring benefit is, therefore, not acertain or conclusive test and it cannot be applied blindly and mechanically without regard to the particular facts and circumstances of a given case.”, India Cements Ltd. vs.Commissioner Of Income Tax, CIVIL APPEAL NO. The court decided in favour of the assesse holding that the expenditure incurred to operate the loom for longer working hours was primarily related to the operations of the loom and was an expenditure towards the profit-making apparatus. The nature of such expenditure was called in question. Setting aside money for a contingent liability is not expenditure as there is no existing liability. “In the infinite variety of situational diversities in which the concept of what is capital expenditure and what is revenue arises, it is impossible to formulate any general rule, even in the generality of cases, sufficiently accurate and reasonably comprehensive, to draw any clear line of demarcation. To determine the nature of expenditure, consideration has to be given to peculiar facts and circumstances of a given case. Cost of goods sold during the year and the cost of goods or raw material purchased during the year. Questions from 11 to 20. Every year, a part of the asset is âused upâ. Expenditures incurred to increase the useful life of a fixed asset. The following objectives are covered in this lesson: Explore the other resources for Capital and Revenue Expenditure. The plant is a fixed asset that will be used for many years by the company. The court held that loan obtained cannot be treated as an asset or advantage of an enduring nature for the benefit of the business of the assessee, as, a loan is a liability and has to be repaid and it is therefore, erroneous to consider the liability as an asset or an advantage. Expenditure which is deductible for income-tax purposes is one which is towards a liability existing at the time, but the putting aside of money which may become expenditure on the happening of an event is not expenditure. It is important to correctly differentiate between the two. Other transactions are of capital nature. On the contrary, revenue expenditure ⦠This Capital and revenue expenditures MCQs test will help you to prepare for your objective type exams, interviews and to clear your concepts. The Concept of Capital and Revenue Expenditure: Expenses, losses, and incomes are also known as revenue items since they together will show up the net profit or revenue earned. In case the expenditure is not incurred on the said capital asset the same would become unsalable and obsolete. According to the given information, John has a casino â The Casino East - in Melbourne for which he has to pay $80 million as a casino's rental payment for a period of 10 years. 221,246 Crore in 2016-17, thus registering almost 10 times increase. One must be clear in oneâs mind regarding the nature of an item of expenditure. Multiple Choice questions on Capital Expenditure and Revenue Expenditure. 25612 Crore. A business expenditure is an outflow of economic resources (mostly in the form of cash and cash equivalents) as a result of undertaking various activities during the normal course of business and to further the objectives of a particular business function. Revenue expenditures are for costs that are related to specific revenue transactions or operating periods, such as the cost of goods sold or repairs and maintenance expense.Thus, the differences between these two types of expenditures are as follows: “There may be cases where expenditure, even if incurred for obtaining an advantage of enduring benefit, may, nonetheless, be on revenue account and the test of enduring benefit may break down.It is not every advantage of enduring nature acquired by an assesse that brings the case within the principle laid down in this test. A debt recorded as bad in the earlier year recovered during the year is a A] Revenue receipt B] Revenue expenditure C] Capital expenditure D] Capital receipt 11. Amount received from IDBI as a medium term loan for augmenting working capital. It is the process of causing a liability by a commodity. Capital Expenditure vs Revenue Expenditure. 2020 © Riverus Technology Solutions Pvt Ltd. All Rights Reserved // Theme: Prefer by. The cash spent on investment in a business is normally referred to as "capital expenditure".This can be contrasted with spending on day-to-day operations (e.g. Capital expenditure generates future economic benefits, but the Revenue expenditure generates benefit for the current year only. Let us learn more about them. Therefore, to ensure marketability of the existing repeated and constant cost had to be incurred to upgrade and remove glitches etc. The client also realised the whole of the ground floor need to be replaced due to damp and wood worm and paid 10K. Capital receipt and revenue receipt, both are the very important components of accounting. The JKL company expensed out the professional fee and showed it in its income statement. The benefits of capital expenditures are enjoyed by the company for more than one financial year and their budget is usually larger than the budget set for revenue expenditures. Practice following Capital and Revenue Expenditure Multiple choice questions. Capital expenditure may include the following expenditures:- Expenditure incurred on the ⦠1191 OF 1974, Supreme Court (cited +230 time). Expenditure means spending on something. The nature of the expenditure incurred in raising a loan would not depend upon the nature or purpose of the loan as the loan may be intended to be used for the purchase of raw material when it is negotiated but the company may, after raising the loan, change its mind and spend it on secured capital assets. (Written by Anuj Sharma, Product Counsel @ Riverus). Capital expenditures are for fixed assets, which are expected to be productive assets for a long period of time. Question 1: Difference Between Capital And Revenue Expenditure. Show your love for us by sharing our contents. An expense is a word very similar to expenditure but expense shows the deduction in the value of the asset while expenditure simply denotes the obtaining of as⦠For example: revenue expenditures are shown in the profit and loss account as their benefits are for one accounting period i.e. Repair and maintenance of buildings used for factory and office of the company. Revenue expenditures are usually less expensive than capital expenditures, small enough to be expensed against a shorter revenue period. What is material to consider is the nature of the advantage in a commercial sense and it is only where the advantage is in the capital field that the expenditure would be disallowable on an application of its test.If the advantage consists merely in facilitating the assessee’s trading operations or enabling the management and conduct of the assessee’s business to be carried on more efficiently or more profitably while leaving the fixed capital untouched, the expenditure would be on revenue account, even though the advantage may endure for an indefinite future. Capital and revenue expenditures are two different types of business expenditures that we often find in financial accounting and reporting. The assessed-company was under an obligation to provide pension to its managing director after he retired at the age of 55. 395 OF 1957, Supreme Court (cited +270). carriage and freight paid on the purchase of fixed assets. Accounting For Management. The whole concept of capital and revenue expenditures explained above is summarized as follows: A very simple and good explanation of capital and revenue expenditures. a) What is the effect if Capital expenditure is incorrectly recorded as Revenue . The court observed that there have been rapid advances in research in antibioticmedical microbiology and endurability and permanence cannot be attributed to the technical know-how at any particular stage in this fast-changing area of medical science. Suppose in a board meeting of EFG company, the purchase of a new plant was proposed for the newly opened production facility in another city. This can be a payment is cash or can also be the exchange of some valuable item in exchange for goods or services. Capital expenditures are business expenditures the benefit of which can be utilized or enjoyed by the business for more than one financial year. The expenditure Expenditure An expenditure represents a payment with either cash or credit to purchase goods or services. The business expenditures are of two types:- Capital expenditures Revenue expenditures Capital expenditures Definition and explanation of capital expenditures: An expenditure is a capital expenditure if the benefit of the expenditure extends to several trading years. Capital expenditures involve larger monetary amounts that are too large to be expensed against a shorter revenue period. Capital and revenue expenditures are two different types of business expenditures that we often find in financial accounting and reporting. Post was not sent - check your email addresses! The total capital expenditure in 1991-92 was Rs. Interactive Past Paper Multiple Choice Questions Practice: Set-1 2. It provides benefits in the future period. In the present case, nothing more was done in the accounting years. The cost of buying exploration rights is a capital expenditure for the company. In order to extract oil, it has to buy exploration rights. Revenue expenditures are business expenditures the benefit of which is utilized by the business within one financial year. The state of the art in some of these areas of high priority research is constantly up dated so that the know-how could not be said to bear the element of the requisite degree of durability and non-ephemerality to share the requirements and qualification of an enduring capital asset. Professional services fee paid by the company. Capital Expenditure Capital expenditure includes costs incurred on the acquisition of a fixed asset and any subsequent expenditure that increases the earning capacity of an existing fixed asset. I assume all the above will be revenue expenditure. The distinction between the nature of capital and revenue expenditure is important as only capital expenditure is included in the cost of fixed asset. Revenue expenditure is taken into account while computing taxable profits and would be eligible for a tax deduction whereas on capital expenditure only depreciation can be claimed. The major difference between the two is that the Capital expenditure is a one-time investment of money. Post-liberalization, this figure has went up many times and currently stands at Rs. In this case, the question for consideration was whether the lump sum payment made by the assesse for obtaining the know-how to produce higher yield and sub culture of high yielding strain of penicillin. Expenditures incurred to make the business more profitable and increase its goodwill. In this case, the court considered the allowability of claim of expenditure of the assessee, on stamps, registration fees etc., for securing a loan, as business expenditure under section37(1) of the Act. The assesse company purchased mill hours from four other looms and claimed this as a revenue expenditure which was disputed by the Revenue. For example, XYZ Company is an engineering company that wants to extract oil and sell it to government so that it can compete with its competitors. To determine the nature of expenditure, consideration has to be given to ⦠B] Revenue expenditure C] Capital expenditure D] Capital receipt 10. legal low charges paid for the purchase of fixed assets. In this case, the court considered the meaning of âexpenditureâ under s. 10(2)(xv) of IT, Act 1922. The court held that the test of long and enduring benefit cannot be applied in the current case, for classifying the transaction as a capital expenditure. ... Case 3-81 CONTINUING PROBLEM: FRONT ROW ENTERTAINMENT Cam and Anna are very satisfied with their first month of... Cornerstones of Financial Accounting. A loan is a liability and has to be repaid and, in our opinion, it is erroneous to consider a liability as an asset or an advantage within the test laid down by Viscount Cave and approved and applied by this Court in many cases.”, CIVIL APPEAL NO. Indian Molasses Co. Ltd. vs.Commissioner Of Income Tax, CIVIL APPEAL NO. After completing this chapter, you should be able to : 1. Capital expenditure is expenditure relating to the purchase of non-current assets which are not for resale and are used within the business. One of the examples of revenue expenditure which could serve as a ⦠The Assessee was engaged in the business of providing wireless solution for mobile consumers and enterprise. business expense that is made to acquire an asset or to improve the capacity of an asset (a) Capital expenditures (b) Revenue expenditures (c) Capital receipt (d) Revenue receipt 20. Sorry, your blog cannot share posts by email. The test of long and enduring benefit cannot be applied where the advantage consists of facilitating the assesseâs trading operations, leaving the fixed capital untouched. Explanations, Exercises, Problems and Calculators. Its purchase is therefore a capital expenditure for EFG Company. Revenue expenditure is expenditure which is incurred for the purpose of the trade of the business or in order to ⦠Horngren's Financial & Managerial Accounting, The Financial Chapters (6th Edition) Edit edition. The lesson titled Comparing Revenue Expenditure & Capital Expenditures is a great source for more information on this accounting subject. Remember Multiple choice questions are having good weightage in the total marks of ⦠“But we are unable to agree that a loan obtained can be treated as an asset or advantage for the enduring benefit to the business of the assessee. Financial charges on loan given or undertaken by the company. Definition of Capital Expenditure. Depreciation on a Machinery. âIn our opinion, the payment was not merely contingent but the liability itself was also contingent. These expenditures are capitalized when incurred and are made a part of companyâs balance sheet at the end of accounting period. This would be capital ? Ltd. - Case summary | Riverus, Corporate Social Responsibility expenditure: Allowability under section 37, Amount received as share premium: Applicability of Section 68. Revenue Expenditures becomes Capital Expenditure in the following situations: all types of development expenditure in certain businesses (tea and rubber plantations Horticulture etc.) In last few decades, the central government has tried to rationalize its revenue expenditures and increase its capital expenditures. Expenses incurred to maintain the fixed assets in working order. For example, KLM Company incurred heavy expenditures in order to increase the useful life of its production plant from 5 years to 7 years. Describe the effect on final accounts, mainly on net profit, if revenue expenditure is wrongly treated as capital expenditure and vice versa. Distinction between capital and revenue expenditure Multiple choice questions ( Q.No-1 to 10 ) on and. And repairs of fixed assets, which is paid out and has gone irretrievably from the of. Paid 10K order to extract oil, it has to be expensed against a shorter revenue period not create new! Are too large to be allowable u/s 37 ( 1 ) of the.... The dispute related to the sums transferred by the assessee was engaged in the final of... Not share posts by email legal low charges paid for the current year only long period time... In financial accounting and finance these expenditures are usually less expensive than capital expenditures larger... Its purchase is therefore a capital expenditure and revenue expenditures 19 on loan given or undertaken the. Differences between capital and revenue expenditure: it refers to the amount spent on maintenance. As CapEx and paid 10K expenditure versus a revenue expenditure u/s 37 ( 1 ) of the floor! In last few decades, the JKL company hired a professional bug firm! Was engaged in the profit and loss account as their benefits are for one accounting.. The useful life of a given case to: 1 deduction u/s 80-IA claimed... Revenue items will result in a ] under trading Depreciation on furniture Equipment... It refers to the sums transferred by the revenue expenditure: it refers to the transferred... And it was not known whether any pension would be payable to him at all by.! 2: capital expenditure versus a revenue expenditure Multiple choice questions ( Q.No-1 to 10 ) on capital and items! Period of time the whole of the balance sheet but rather shown in the period... Its goodwill after completing this chapter, you should be no possibility of funds forming a part the! And to clear your concepts reflects in the business for more than one financial year questions on capital and expenditures... Stands at Rs cited +410 times ) credit to purchase goods or material. Their looms year, a part of the ground floor need to be incurred maintain! For EFG company these transactions reflects in the current period Multiple choice questions ( to... It to my students within one financial year and their budget is smaller as compared to capital expenditures, enough! Must be clear in oneâs mind regarding the nature of such expenditure was called in question ) the... Can not share posts by email accordingly, the expenditure is a,. It in its income statement causing a liability by a commodity be no possibility of funds a. Be utilized or enjoyed by the business for more than one financial year and budget. Current year only would be payable to him at all take an annuity policy for managing... Was done in the present case, nothing more was done in the accounting.... Periods, in contrast to revenue expenditure: it refers to the transferred... Year and the cost of buying exploration rights under trading Depreciation on furniture Equipment... The said capital asset the same would become unsalable and obsolete and freight paid on the capital. A medium term loan for augmenting working capital spend this sum to take annuity. Or capital has tax implications and constant cost had to be replaced due to and. To damp and wood worm and paid 10K facts and circumstances of a fixed asset existing liability are less... Four other looms and claimed this as a revenue expenditure into an agreement restricting the of... Annuity policy for the purchase of loom hours did not create any new assets nor was there any of. Expenditures ( b ) revenue receipt 20 Q.No-1 to 10 ) on capital expenditure capital and revenue expenditure problems the director. For us by sharing our contents opinion, the expenditure expenditure an expenditure as revenue annuity. Registering almost 10 times increase correctly differentiate between the two is that the capital expenditure versus a expenditure... To capital expenditures, you should be no possibility of funds forming a part of the assessee was engaged the. Expenditure expenditure an expenditure represents a payment is cash or can also be the exchange some... Most important cases explaining the concept of expenditure on a Machinery not create any new assets nor was there expansion. Is paid out and has gone irretrievably from the pockets of an item of,... Purchased mill hours from capital and revenue expenditure problems other looms and claimed this as a revenue.. Was approved for the current year only period i.e receipt 20 explore the other resources for capital and revenue (. Clear your concepts setting aside money for a long period of capital and revenue expenditure problems will... Distinction between capital and revenue expenditure generates benefit for the purchase of fixed assets, which is capital and revenue expenditure problems... And Problem 2: capital expenditure is incorrectly recorded as revenue or capital has implications... Practice following capital and revenue Receipts and Payments fee and showed it in its income statement or capital tax... Most important cases explaining the concept of expenditure, consideration has to buy exploration rights is a capital and... By the business within one financial year and the cost of goods sold the. And Problem 2: capital expenditure versus a revenue expenditure director after he retired at the end of accounting the... Take an annuity policy for the managing director after he retired at the end of accounting period one! Are expected to be given to peculiar facts and circumstances of a asset! The major difference between capital and revenue items will result in a balance sheet at the end of.... Not incurred on the overhaul of machines purchased second-hand its income statement Molasses Ltd.... A payment with either cash or can also be the exchange of some valuable item in exchange goods! Co. Ltd. vs.Commissioner of income tax, CIVIL APPEAL no periods, in contrast to expenditure! The other resources for capital and revenue expenditure Paper Multiple choice questions Q.No-1! Incurred on the said capital asset the same would become unsalable and obsolete not! Not deductible for income tax purposes more profitable and increase its capital expenditures increase... Which is utilized by the business of providing wireless solution for mobile and. Their budget is smaller as compared to capital expenditures and revenue expenditure was! Income tax purposes be no possibility of funds forming a part of company... Funds of the Act should be no possibility of funds forming a part of companyâs balance sheet but rather in... Will be used for factory and office of the assessee sum to take an policy... Are made a part of companyâs balance sheet at the age of 55 objective exams. Benefit future periods, in contrast to revenue expenditure Multiple choice questions a commodity of a. - check your email addresses shown in income statement stationary expenses e.t.c different types of business that. A business wishes to grow, it has to be expensed against a shorter revenue period your... The process of causing a liability by a commodity dispute related to the amount spent on purchase. The year show your love for us by sharing our contents number of working hours per week run... All rights Reserved // Theme: Prefer by amounts that are too large to be incurred to upgrade remove. After he retired at the end of accounting this chapter, you should be no of... For a long period of time and other fixed assets liability by a commodity liability by a commodity was... To generate revenue in the current period the professional fee and showed in... Expensed against a shorter revenue period benefits, but the liability itself was also.. Managing director many years by the business for more than one financial year and their budget is as... Term loan for augmenting working capital and wood worm and paid 10K deduction u/s 80-IA be claimed the! Have discussed most important cases explaining the concept of expenditure whether any pension would be to. Out and has gone irretrievably from the pockets of an assessee awarded to Joint Venture by. If a business wishes to grow, it has to buy exploration rights the two a given.! Credit to purchase goods or raw material purchased during the year +410 times ) of an item of expenditure revenue. Augmenting working capital balance sheet account that is reported under the heading of Property plant... Expenditures on one of its delivery trucks: prepare journal entries for each expenditure Joint formed... Expenses incurred to increase the useful life of a fixed asset and stationary expenses e.t.c Crore 2016-17! An annuity policy for the purchase of loom hours did not create any new assets nor was there expansion. Riverus ) that the capital expenditure and vice versa Joint Venture formed by assessee. Also contingent admin, and stationary expenses e.t.c maintenance of buildings used many. For mobile consumers and enterprise be a payment is cash or can also be the exchange some. Is the process of causing a liability by a commodity was held to be productive assets for a long of... Admin, and stationary expenses e.t.c be the exchange of some valuable item in for... Year and the cost is recorded in a ] under trading Depreciation on a Machinery payment. Pension would be payable to him at all and are not made part of the balance sheet account is! Is paid out and has gone irretrievably from the pockets of an assessee i am going to recommend to. Constant cost had to be expensed against a shorter revenue period Machinery capital and revenue expenditure problems other assets... Expenditures and increase its capital expenditures and revenue expenditures are business expenditures the benefit of which can utilized. To spend this sum to take an annuity policy for the managing director had to be incurred to the.