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24.1
• Capital expenditure are payments for the purchase of assets, which provide benefits to the
business for several accounting period. Example for capital expenditure is purchase of
premises.
• Revenue expenditure are expenditure that provide benefits only during the current
accounting period. They are called revenue expenditure because they are matched against
that revenue earned during the period. Example is purchases of stock for resale.
b)some of the following items should be treated as capital and some as revenue. For each of them
state which classification applies:
ii. Carriage paid to bring the machinery in(i) above to the works-Capital
v. The purchases of a soft drinks vending machine for the canteen with a stock of soft
drink-Revenue
vi. Wages paid by a building contractor to his own workmen for the erection of an office in
the builder’s stockyard-Capital
24.2A Indicate which of the following would be revenue items and which would be capital items
in a wholesales bakery
e) Twelve dozen sets of cutlery, purchases by a catering firm for a new dining-
room-Capital
25.2
QUESTIONS
A business had always made a provision for doubtful debts at the rate of 4%
of debtors. On 1 January 20x8 the provision for this, brought forward from the
previous year, was £320. During the year to 31 December 20x8 the
remaining debtors totaled £16,800 and the usual provision for doubtful debts
is to be made.
a) The Bad Debts Account for the year ended 31 December 20x8.
c) Extract from the Profit and Loss Account for the year.
25.3
QUESTIONS
A business started trading on 1 January 20x7. During the two years ended 31
December 20x7 and 20x8 the following debts were written off to the Bad
Debts Account on the dates stated:
i. The Bad Debts Account and the Provision for Doubtful Debts
Account for each of the two years.