Capital and revenue payments

Definition

Expenditure is the full amount incurred by the business concern whether paid or not while the term payment refers to the amount actually paid.

Payment is of two types:-

  1. Capital payment
  2. Revenue payment

Capital payments

The capital payments are the amount actually paid on account of some capital expenditures.

Example:

Some furniture is purchased from Wild Wood Furniture Store for $7,000 by paying cash $4,000 and promising to pay the balance within five months, $7,000 is a capital expenditure and $4,000 is a capital payment.

Revenue payments

Revenue payments are the amount actually paid on account of some revenue expenditures.

Merchandise worth $1,300 are purchased from M/s John & Sons, by paying cash $800 and promising to pay the balance after 3 months, $1,300 is revenue expenditure and $800 is revenue payment.

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