Understanding capital expenditure
Capital expenditure is the long-term expenditure that further increases the capacity and capability of the organization incurring it or adds up the assets of the organization. Capital expenditures are found on the asset side of the balance sheet. It is mostly incurred on assets like furniture, equipment, vehicle, or lands which benefits the operating capacity of the organization.

Understanding revenue expenditure
Revenue expenditure is incurred on small and regular functions of the organization like inventory, insurance, tax, stationery, rent, electricity, postage, employment wages, etc. Revenue expenditure Neither adds up the assets of the organization nor reduces any kind of liabilities. Revenue expenditure is an essential and a very necessary part to carry on day to day operations of the organization. It can be categorized into-

1. Revenue generating expenditure- the essential expenditure for meeting the operational costs of the business is classified as operating expenses.
2. Revenue generating asset maintenance expenditure – the expenditure incurred by the organization for repairing or maintaining the assets to enhance their lifespan is categorized as maintenance expenditure.

The main differences between capital expenditure and revenue expenditure are listed below-

• Capital expenditure is the expenditure incurred by an organization to add up the number of its assets or expenditure incurred to increase the lifespan of the assets whereas revenue expenditure is incurred on the daily operations of the organization.
• Capital expenditure is incurred for a timespan of a longer period as compared to revenue expenditure. Expenditures are mostly limited to an accounting year.
• Capital expenditure usually appears under the asset side of the balance sheet, revenue expenditure is not mentioned in the balance sheet.
• The purpose of capital expenditure is how to increase the profitability and earning capacity whereas the purpose of revenue expenditure is to sustain the daily operations.
• Capital expenses are not recurrent like revenue expenses.
• Revenue expenses and not capitalized as capital expenses.
• Capital expenditure producers yield after a long time on the other hand revenue expenditure is mainly consumed within a single accounting year.
• The count of capital expenditure is a real account and the account of revenue expenditure is a nominal account.
• The amount involved in capital expenditure is generally huge and the amount involved in running expenditure is generally small.