Fixed asset expenditure is classified into two parts namely capital expenditure and revenue expenditure. Capital expenditure is the expenditure that is included in the cost of fixed asset. Purchase cost and delivery cost are included in capital expenditure. With manuals as treatment of capital and expenditure homework answers, you will get a well analyzed and detailed idea of this whole process and therefore
A company may purchase machinery that is needed from a distant land, and there would be transportation charge involved while transporting material from that distant land. The transportation charge is called delivery charge. Discount received while the purchase is reduced and up gradation of machinery, costs are included under capital expenditure.
Companies need to upgrade their machinery to suit the business needs. An information technology company dealing in teleradiology services would like to keep their machines upgraded always. The reason is that radiology images are transferred online to hospitals and time is an important factor in knowing the answer. So companies doing teleradiology services would spend money on upgrading their hardware capacity and improving the software.
Purchase of office equipment, purchase of land also happens to come under capital expenditure. The benefits of capital expenditure should get for more than one year. Students may find it difficult to complete treatment of capital and expenditure homework answers due to technical knowledge involved.
Replacement cost is another cost that comes under capital expenditure. There are occasions in which a company has to replace an existing vehicle with new one. The reasons can be many >Sometimes the vehicle would have met with an accident and would not be in a condition to get it repaired. At that time it is better to purchase a new one. A machine can also get damaged due to unforeseen contingencies like an extra power supply or low power supply and so on.
Types of capital expenditure
- If a company incurs expenditure for research work, it is classified as capital expenditure. The reason is that research work benefits would come or get to company financial book after a year.
- Expenditure like training done for employees comes under capital expenditure. Welfare projects that bring in cash to a company would also come under capital expenditure.
- Business development steps like advertisement have a cost, and that is added to capital expenditure. An advertisement would bring in revenue to a company with brand recall and brand identity even after one year of showing advertisement.
- Normal business functions like replacing business machines do come under capital expenditure account
- Capital expenditure happens when cost reduction becomes a necessity and expenditure also happens when revenue should increase. Non-economic expenditure also happens, and students should know how to classify expenses.
- Major project investments can also bring capital expenditure. Depreciation is another aspect that brings along with capital expenditure. Depreciation happens every year, and a depreciating percentage or amount is added as cost.
Treatment of capital and expenditure homework answers: Difficult scenarios
Capital expenditure is a complex subject and is never too easy for a student to grasp the basics and write about it. A student may also find it difficult to understand subject due to lack of interaction in class and due to non-availability of time with faculty. A student would need high grades in assignment to career advancement, and a student may find it difficult to complete an assignment on a deadline set without understanding basic.
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