The distinction between revenue expenditure and capital expenditure, and revenue income and capital income
Businesses split their spending and income into two types. Revenue items relate to day-to-day trading. Capital items relate to buying or selling long-term assets.
Real World
When easyJet buys a new Airbus aircraft, that is capital expenditure; when it pays for jet fuel each week, that is revenue expenditure — only the fuel cost hits the income statement immediately.
Exam Focus
Always justify your classification with one reason — 'it is capital because it provides benefit for more than one year' earns the application mark.
Essay Framework
Use PEEL to structure every paragraph. Tap each step for guidance and an example.
How well did you know this?