Question: Expenditures can be divided into two general categories, capital expenditures and revenue expenditures. (a) Distinguish between these two categories and their treatment in the accounts.

Expenditures can be divided into two general categories, capital expenditures and revenue expenditures.
(a) Distinguish between these two categories and their treatment in the accounts.
(b) Discuss the impact on both present and future balance sheets and income statements of improperly distinguishing between capital and revenue expenditures.
(c) What criteria do firms generally use in establishing a policy for classifying expenditures under these two general categories?

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a Capital expenditures are intended to benefit more than one accounting period The expenditures should therefore be recorded by a charge to an asset a... View full answer

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