Capital vs Revenue Expenditure

Accountancy

Sir, in bike example, the insurance cost is a recurring nature of expense and the benefit from this does not spread over multiple accounting period (may be a third party insurance would be spread over multiple accounting period) and is not a one time expense. Still, we are considering it as a capital expense because it is necessary to bring the asset for its intended use. To ride the bike insurance is mandatory. Here, there is a clash between two theories (Recurring nature Vs Purpose of acquiring the asset), how could we justify one theory over the other? Video Details ------------- Accounting - CA Foundation (New) Capital And Revenue Expenditures and Receipts #2. Differences between Capital & Revenue Expenditure

Vignesh Venkatesan

CA Final

★ 5

04-Aug-25 07:53

286

Answers (1)

Best Answer

Insurance will be expensed off over the validity of insurance. say for e.g. you need insurance for 3 years mandatorily. That is shown as an asset in balance sheet and expensed over three years.

CA Suraj Lakhotia

Admin

04-Aug-25 09:53