7.) state some of the cases where revenue expenditure becomes capital expenditure.

  1. Repair charge are ,usually,expentiture.But repair charges incurred on a second -hand machine so as to put ina running condition and make it useful to the business should be treated as a capital expenditure .
  2. Wage are ,genarally , a revenue expenditure. But wage paid for the construction ,erection installation or making of any fixed asset of the bussiness say buildings machinery or furniture should be considered as capital expenditure.
  3. Raw matirials and store consumed are genarally revenue expenditure.But raw matirials and stores consumed in the making of a fixed asset should be treated as a capital expenditure .
  4. Legal  charges are usually, a revenue expenditure .But legal  charges incurred on the acquistion of  any property should  be regarded as a capital expenditure ,and should be added to the cost of the property acquired  .
  5. Fieight and carriage are,genarally,arevenue expenditure.But freight and carriage  paid for the transpotation of any fixed asset acquired to the place  of bussinnes should  be taken as a capital expenditure.
  6. Brokerage is, ordinarily,a revenue expenditure. But brokerage paid for the the purchase of any security or investment like shares or debentures or any fixed asset should treated  as capital  expenditure , and should be charged to the concerned  investment account or fixed asset account.
  7. State the characterstic features of receipts and payments account.

The chief characterstic feature of receiptsand  payments account

  1. It is a real account.
  2. It is a prepared the cash book.
  • It starts with the opening cash and bank balances,and ends with the closing cash and bank balances.
  1. As in the cash book,receipts are shown on the debit side and payments are shown on the credit side of the receipts and payments account.
  2. It includes receiptsand payments of both capital and revenue nature.
  3. It includes allreceipts and payments made during the accounding year ,whether they relate to the previous year,current year or next year.
  • As it is a summary of actual cash payments, it does not  included outstanting receipts and payments,and non-cash items like bod debts, depreciation,etc,

8.) State  the main features of Incomes and Expenditure Account.

The main  feature of income and expenditure account are;

  1. It is a normal account.
  2. It is prepared from the receipts and payments account and other relevant information.
  • It taken into account the totalincomes earned duringthe year ,wthether received or not,and the total expenses incurred durring the year, whether paid or not.
  1. It is prepared on the sa lines as a profit and loss account.As in a profit and loss accout,all incomes are shown on the credit side ,and all expenses are shown on the debit side ,of the incomes and expenditure accout.
  2. It includes only revenue receipts and revenue payments .
  3. It includes revenue receipts and revenue payments of only the currect year.It does not include revenue receipts and revenue payments of the previous year or the next year.
  • It includes not only the incomes actully received,but aslo the outstanding incomes.Similarly,it includes not only the expenses actully paid,but aslo the outstanding expenses.
  • It aslo inculdes non- cash itemes such as bad debits,depreciation,etc.
  1. It dose not start with any opening balance .But it has a closing balance .The closing balance receipts the exessof incomes over expenditure or the exess of expenditure over income.If the credit side exceeds the debits  side,the balance is called “excess of income over expenditure “or”surplus”.On the other hand,if the debit side exceeds the credit side the balance is caaled excess of expenditure over income “or “defict”

The following stepts  have to betaken to convert a receipts and payments account into an income and expentiture account:

  1. The opening and closing cash and bank balance appearing in the receipts and paymentsaccount should be exclueded from the income and expenditure account.
  2. All the items of capital receipts and capital payments account should be exclueded from the income and expenditure account,and only the current year’s revenue receipts and revenue   payments shouldbe included in the income and expenditure account.