Classification of Expenditure

Expenditure can be classified into thus: 

(i) Capital expenditure and (ii) Revenue expenditure.

Under capital expenditure, it refers to those expenditure on installation of assets such as Electric and Telephone, expenditure on transportation of assets, expenditure made to improve assets and like-wise expenditure made on trademark etc.

Note that expenditure on installation and, transportation of assets should e included to the cost of the assets. Moreso, expenditure made in order to improve the assets that is, to obtain greater efficiency should also be added to the cost of the asset.

Under revenue expenditure, it refers to those expenditure that can be incurred on the repairs of assets; purchase of goods for resale, entertainment, rentages and rates, renewal of assets hiring of ‘assets, salaries, and wages etc

NOTE: – (For examples).

(i) Purchase of leasehold premises. (i) Depreciation of leasehold.
(ii) Installation of cooling and ventilation apparatus. (ii) Annual repairs.
(iii) Charge for maintenance. (iii) Ground rents.
(iv) Purchase of furniture. (iv) Annual depreciation.
(v) Purchase of patent rights. (v) Annual repairs.
Immediate repairs to make efficient Depreciation of patent rights.
Cost of immediate Painting. Renewal fees.

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