All 26 Books of Prime Entry questions
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How do you post the purchases returns day book? What is a remittance advice and how does it relate to the books of prime entry? What controls help ensure completeness and accuracy in the books of prime entry? What is the accounting equation and how does bookkeeping maintain it? How does a settlement (cash) discount get recorded compared with a trade discount? How do the books of prime entry contribute to the double-entry system? How would you record the purchase of a non-current asset on credit in the books? How do you record opening entries when starting a new set of books?
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What is the difference between capital and revenue expenditure?

Intermediate

Answer

Capital expenditure buys or improves non-current assets giving long-term benefit (capitalized and depreciated). Revenue expenditure is day-to-day running costs consumed in the period (expensed immediately). Correct classification at entry affects profit and the balance sheet, and misclassifying is an error of principle.
New machine 10,000 = capital (asset); machine servicing 300 = revenue (expense).
Real-world example Buying a delivery van is capitalized; fueling it is revenue expenditure expensed at once.

Common follow-ups: Which is capitalized? | What error results from misclassifying?

Correcting Errors Trial Balance Books of Prime Entry
All 26 Books of Prime Entry questions