How can we help?

You can also find more resources in our Help Center.

23 terms

capital expenditure vs. revenue expenditure

STUDY
PLAY
When should costs be expensed
when costs incurred to maintain a given level of service revenue
If useful life of the asset is increased should cost be capitalized?
yes
If Quantity of units produced are increased should cost be capitalized?
yes
if Quality of units produced is increased..should it be capitalized?
yes
When should cost be capitalized
is the useful life is increased, quality increased, or quantity increased.
additons
extension of existing assets
should additions be capitalized or expensed
capitalized
why are additons capitalized?
because a new asset is created
Improvement
substituiton of an improved asset
replacement
substitution of similar asset for an existing one
What is substituion approach used for?
for improvements and replacements
what do you recognized in the subsition approach?
recognize a gain or a loss for the difference in value
how does substition approach work?
removes the old asset from the balance sheet and capitalize the cost of the new asset.
What is "Capitalize cost of new asset" used for?
improvements and replacements
Which improvement and replacement method is used the most?
"capitalize cost of new asset"
what is charge accumulated depreciation used for
improvements and replacements
how does "charge accumulated depreciaton" work?
debit accumulated depreciation when expenditure extends the useful life asset instead of enhancing the quantity or quality of its output.
rearrangements
movement of assets to facilitate future use
are rearrangements capitalized or expensed?
they are capitalized...only over period of benefit
how should rearrangements be expensed
immediately
should repairs be expensed or capitalized?
expensed
repairs
expenditures made to maintain plant assets in operating condition.
Allowance method may be used for
repairs in order to facilitate preperation of interim financial statments