Can someone please mention with reasons whether the following expenditure are capital, revenue or deferred revenue:-
1. Rs 7,000 being expenses on issue of shares
2. Labour welfare expenses
3. Compensation paid to retrenched for loss of employment
4. Received financial aid from state government
5. Discount allowed on issue of shares and debentures
(Answer with Reason is much appreciated)
Dear Shweta,
Let's understand few concept before analysing about the type of expenditure..
Business transaction is of 2 types:
Apart from this there is Deffered Revenue Expenditure.
Since you are asking about the expenditure so i am writing here only about Expenditure..
Capital Expenditure:
Those expenditure which gives benefit for more than one year. For e.g.,
Revenue Expenditure:
Those expenditure which gives benefit for one accounting year only. For e.g., Compensation paid to employees.
Deffered Revenue Expenditure:
Those expenditure which gives benefit for more than one year AND expenditure not incurred on Fixed Asset.
Whether a particular expense is CAPITAL or not, in order to find the answer of this question check following conditions ...
If above conditions is satisfied then it is capital in nature.
ANSWER TO YOUR QUERY
For reason please read the whole article. I hope this will help you in order to understand the above mentioned topic....
First of all thank you so much for taking out your time and answering my question, that was so helpful, i want to know whether expense incurred on issue of shares and compensation paid to retrenched employee can be of deferred revenue nature?
Compensation paid to retrenched employee may be a deffered revenue expenditure.
For more info read about Deffered revenue Expenditure on above.
CAclubindia
