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Chapter 1

9.4 Capital and revenue transactions

Capital transactions

Capital transactions relate to costs incurred that will affect the organisation in the
long term, i.e. more than a year.

For the purpose of your studies for this subject we will assume this relates to
purchases of non-current assets such as buildings, plant and machinery etc.

Capital costs or capital expenses will NOT be included as an expense in the
statement of profit or loss but as a non-current asset in the statement of financial
position.

Revenue transactions

Revenue transactions relate to expenses that will only affect the organisation in the
current accounting period, for example wages, rent payable and vehicle running
costs.

Revenue expenses will be included as expenses in the statement of profit or loss and
NOT in the statement of financial position.

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