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Capital and Revenue Expenditures

6 May, 2015 - 17:39

Expenditures on plant assets fall into two categories:

  1. capital expenditures: these increase the productive capacity, efficiency or useful life of the asset, and
  2. revenue expenditures: these include maintenance and repairs.

If an expenditure increases the efficiency or capacity of a plant asset, that Plant Asset account is debited. If an expenditure increases the useful life of a plant asset, the Accumulated Depreciation account is debited. Revenue expenditures are expensed in the year incurred.