Capital and Revenue Expenditure Resources for Educators

Suggested prior knowledge:

To comprehend this topic and to achieve the learning objectives successfully, students should have the previous knowledge of the following areas:

• Double entry book-keeping system.
• The difference between Assets and Liabilities and Revenue and Expenses.
• Various day to day activities of the business.
• The purpose of non-current assets.
• The different sources of finance to fund the expenditure of the business.
  

Context:

To get the most truthful picture of the financial position of the business, it is essential to classify Expenditure and Receipts accurately. 

Teaching time:

Cambridge recommends three hours of teaching time for this topic.  Depending on students’ standard and learning activities planned,  it may be extended to three and half hours.

Syllabus reference:

Cambridge O Level - Principles of Accounts (7110): 6.2 Accounting procedures - 6.2.1 Capital and revenue expenditure and receipts. Cambridge IGCSE – Accounting (0452): 6.4 Accounting procedures - 6.4.1 Capital and revenue expenditure and receipts

Learning objectives:

Students should be able to: Define the meaning of Capital Expenditure, Revenue Expenditure, Capital Receipts and Revenue Receipts. Distinguish between Capital and Revenue Expenditure;  Capital and Revenue Receipts. Account for Capital and Revenue Expenditure, Capital and Revenue Receipts. Calculate and comment on the effect on profit and asset valuation of the incorrect treatment of capital and/or revenue expenditure and capital and/or revenue receipts.

Suggested teaching activities:

Explain the definitions of Capital Expenditure, Revenue Expenditure, Capital Receipts and Revenue Receipts with suitable examples taken from the surrounding environment.  Eg.  Take your school as an example.  Explain school property and computers in the ICT lab as Capital expenditure. Whiteboard markers,  worksheets to the students and salaries to the teachers as Revenue expenditure.  School fee collected from the students as Revenue Receipts.  Grants received from the local government body for the improvement of the school library as Capital Receipt.  

Divide the students into group of four.  Select different business establishments which are very familiar to all the students, such as a bookstore, a grocery store, a local market which they often visit for various purposes and ask each group to list capital and revenue expenditure and capital and revenue receipts which may occur within that selected business.

Select students randomly, and a give a transaction of Capital Expenditure or Revenue Expenditure or Capital Receipts or Revenue Receipts to classify.

Explain the effect of incorrect treatment of Capital and Revenue Expenditure and Receipts on Profit for the year and Asset valuation in the Statement of Financial Position.

Prepare worksheets based on past paper questions and ask students to practice given worksheets at home.  Capital and Revenue Expenditure resources section of this website provides list of past paper questions for this topic.

Take students to the ICT Lab in the school and conduct an online surprise test using interactive quizzes at www.accounting-daddy.com 

Learning resources:

Offline resources:

Business Accounting, Volume 1, 13th Edition by Alan Sangster and Frank Wood, ISBN10: 1292084669 /ISBN13: 9781292084664

Business Accounting: Multiple-Choice Question Book, by Tommy Robinson and  Frank Wood, ISBN 027364193X, 9780273641933.

Cambridge O Level Principles of Accounts, Authored by Catherine Coucom, ISBN 978-1-107-60478-0

IGCSE and O Level Accounting, Authored by Catherine Coucom, ISBN 978 0521 72001 4.

IGCSE and O Level Accounting Workbook, Authored by Catherine Coucom,  ISBN 10: 0521144159/ISBN 13: 9780521144155

Online resource:

www.accounting-daddy.com