Question

1.When dealing with a long-term (capitalized) asset such as a machine, how do you treat items such as expenditure for transportation, insurance, installation, and so forth for a machine that has just been purchased? Do you expense these items on the income statement or record them differently?

2.And on a slightly different tack, what is the difference between a capital expenditure and a revenue expenditure?

Answer 1

Answer: 1) The expenditure for transportation, insurance, installation of long term assets( ex: machine ) would be capitalized that means these expenditure are added to the cost of machine it cannot be transfered to income statement.

2) Difference between a capital expenditure and a revenue expenditure

Capital expenditures are for fixed assets, which are expected to be productive assets for a long period of time. Revenue expenditures are forcosts that are related to specific revenue transactions or operating periods, such as the cost of goods sold or repairs and maintenance expense.