Reflection Accounting

There are two (2) types of expenses for a business; one is either considered capital improvement it is considered repairs or maintenance. They both enhance the business’ functionally. Capital improvements and repairs have two different purposes.

Capital expenditures are expenses the company incurred to improve the operations of the business. Capital expenditures are accounted for over a length of time. Capital expenditure is also depreciated over time which means a percentage of the overall item is taken directly from the company’s asset over the life span of that purchase. The process in which this expenditure takes: It first goes on the balance sheet and then it goes on the incomes statement In most cases the depreciated value is divided among the lifespan of the purchase, and the life span is not always a guarantee figure which may cause the company to go back and amend their financial reporting documents. (Kimmel, Weygandt, Kieso, ch.9)

Revenue expenditure is charged in the time period that the expense incurred to the income statement. These expenses are commonly referred to as repairs or maintenance expenses of the company. Revenue expenditure happens on a more frequent basis. Revenue expenditure is charged against revenue as the cost happens. The journal entry for revenue expenditure; the company debits “repair or maintenance” and credit the method it was paid by. (Kimmel, Weygandt, Kieso, ch.9)

Repair 500

Cash 500

Capital expenditures and revenue expenditures both affect the company’s assets. One directly affects and is debited directly from the company’s assets while revenue expenditure is leaned against receivables for the company for the corresponding reporting period. Capital expenditures the company debits the actual asset affected. (Kimmel, Weygandt, Kieso, ch.9)

Office Computer 500

Cash 500

Examples of capital expenditure are legal fees and fees associated to branding of the business. Examples of revenue expenditure are...