...Revenue Expenditures & Capital Expenditures Tracey DeSautel November 1, 2014 University of Phoenix XACC/291 In the world of accounting, there are numerous types of expenses that come along with running a business on a day to day basis as well as overall. There are things that break down and add value to the companies assets as well as things that are expensed to run the business on a daily basis. These can break down to two important items and those are Revenue expenditures and Capital Expenditures. Revenue expenditures is the amount that is expensed immediately. Thereby being matched with revenues of the current accounting period. Examples include things such as routine repairs because they are charged to a direct account such as “ repairs and maintenances expenses> these do not extend the life or improve the assets for the company. Capital expenditures are amounts spent to acquire or improve a long term asset. These can be things such as buildings or even equipment. These are usually recorded in accounts classified as “ property, plants and equipment”. These are charged to depreciation expense over the assets lifespan. It breaks down to capital expenditures are for items such as machinery and buildings where as revenue expenditures are for things that create revenue such as advertising and labor. A further look into capital expenditures and examples are that, that do not occur in daily transactions for the company and include such purchases that may include the...
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...Revenue and capital expenditure are aspects of business management that seem very similar at first. Both revenue and capital expenditure are purely focused on the process of spending money to help a business survive and grow. The key difference between the two is the intention of the expenses and the direction of the money flow. Revenue is for short-term costs that are not used afterwards to make the company grow, such as repairs which are most common. Capital expenditure is for assets that are considered or categorized long-term, such as new vehicles or software, which will be used to make the company stronger. Revenue expenditure is money being spent immediately and exclusively for short-term purposes. These are expenses associated with profit-producing assets, such as repair, that may or may not increase the life of the given asset. Revenue expenditure is more often associated with day-to-day costs the company accrues through its life cycle. Capital expenditure is money is being spent on assets that will increase the company’s ability to pull in profit or operate at a higher performance level. New software technology, vehicles, machinery and tools that will be used for at least 12 months are considered capital expenditure. Capital expenditure, unlike revenue, is looked at more as an investment than a cost, because it is being used to strengthen the company so it can do better business. When purchasing a capital asset, a business either will spread the cost out over the asset’s...
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...Comparing Capital Expenditures In certain industries there are clear leaders. For example, Wal-Mart is a clear leader in the retail industry and Google is a clear leader in search engines. But with smaller companies find ways to thrive in those giant’s shadows. Competition in the coffee industry is hard to distinguish at times, but Starbucks is a brand name that stands out on its own. Coffee competitors have done a good job of differentiating themselves by using environments and product mix. Coffee is the second largest U.S. import, and specialty coffee is forecasted to be an $11 billion dollar a year industry. In order to strive in this industry, companies must have the appropriate buildings, properties and equipment. Capital Expenditures are the cash that is used to buy, revamp or upgrade these physical assets. Capital expenditures are forecasted using CapEx % of gross profits and are allocated proportionally to each division based on the gross margin. This paper will compare the capital expenditures of Dunkin Brands and the Starbucks Corporation (Fig.1). Direct Competitor Comparison SBUX DNKN Market Cap: 49.50B 4.42B Employees: 160,000 1,104 Qtrly Rev Growth (yoy): 0.11 0.06 Revenue (ttm): 14.02B 667.67M Gross Margin (ttm): 0.57 0.79 EBITDA (ttm): 2.59B 313.12M Operating Margin (ttm): 0.14 0.39 Net Income (ttm): 1.51B 106.11M EPS (ttm): 1.97 0.94 P/E (ttm): 33.59 44.29 PEG (5 yr expected): 1.61 1.72 P/S (ttm): 3.47 6...
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...Surgery Unit Director who is getting ready to prepare a capital expenditure funding program for the coming year. His unit is too small and is running at over 90% capacity, so Ted wants more room. On the other hand, a cardiology surgeon at the hospital wants to create a new cardiac surgery program that would require extensive funding for new state-of-the-art equipment. Therefore, the surgeon has been campaigning with the hospital board members (Baker & Baker, 2011). Furthermore, Ted will need valuable information and will need to have a great strategy to prepare the capital expenditure funding program. Baker & Baker (2011) explains, “Capital expenditures involve the acquisition of assets that are long lasting, such as equipment, buildings, and land. Therefore, capital expenditure budgets are usually intended to plan, monitor, and control long-term financial issues” (p. 177, para 1). While Ted is preparing a capital expenditure budget proposal, there are four requests he should ask for upon creating the proposal. First and foremost, Ted should compose a timeline to show when his unit will open along with justification of the need for the proposal based on firm estimates of future needs (Department of Premier and Cabinet, December 2010, p. 9). A timeline will be able to let the others see his plan more clearly. In addition, Ted should also ask for the hospital’s guidelines and criteria for preparing a capital expenditure funding program. Baker & Baker (2011) states, “Some organizations...
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...Comparing Walmart and Target Capital Expenditures University Comparing Walmart and Target Capital Expenditures In every business there is always a need for capital expenditures. Capital Expenditures can be very beneficial and can also differentiate the numbers from rival companies. According to readings “capital expenses are extensive and mostly hold a company’s substantial amount of money. Companies invest in prime property, plant, machinery, buildings and other forms of fixed assets, which also act as securities for the company. I chose to look up the Capital Expenditures of two companies that are known in many households: Walmart and Target. The annual report of mutually businesses over the past three years will be examined. This paper will examine and compare the reports and the amount of capital spending over the past three years while defining how the amount of capital spending remains constant or if it’s altered. Capital expenditures can determine the major financial decisions that a company must make in order to acquire a sound investment. This paper will attempt to expand on the clarification of capital expenditure and the impact it can have on the organization’s debt capacities and capital structures. As stated by Byrd and associates in the text, there should be a comparison of the level of capital spending across the two firms. The paper will further point out how the spending was similar and/or different and speculate why the similarities or differences might...
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...Comparing Capital Expenditure for NBG and INVESCO Name: Course: Number: As defined by Hitchner, & Mard, (2003), capital expenditure is a cost that is incurred today for future benefits realization. Today’s capital expenditures create a difference in the company’s future status depending on the company’s strategies and resolutions. Capital expenditures are extensive and in most case, they will hold most of the company’s money. At one point in time, companies will invest in plant machinery, buildings, prime property, or any other form of fixed assets. Despite having the stage at which any company will have to incur capital expenditure, these capital expenses will vary depending on the industry the company is operating in, its operations, and the size of the company. Despite being closely related to the capital assets, capital expenses also relate to the maintenance cost of the already acquired assets (Hitchner, & Mard, 2003). The paper will analyze the capital expenditures of INVESCO and National Bank of Greece (NBG) companies by providing the differences and similarities of their capital expenditures. The analysis of the capital expenditure for the two companies will be between 2011 and 2013 financial years. The National Bank of Greece (NBG) The NBG is a global financial organization with well-established branches in various countries including the United States of America. NBG offers financial products and services to their clients ranging from those of individuals...
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...Under United States income tax law, to make a deduction in the current taxable year, a taxpayer must be able to show that a particular cost is a business expense[1] (but not an expense related to personal activities)[2] and not a capital expenditure.[3] Capital expenditures either create cost basis or add to a preexisting cost basis and cannot be deducted in the year the taxpayer pays or incurs the expenditure.[4] In terms of its accounting treatment, an expense is recorded immediately and impacts directly the income statement of the company, reducing its net profit. In contrast, a capital expenditure is capitalized, recorded as an asset and depreciated over time. Contents [hide] 1 Four ways costs can be capital expenditures 2 Illustrative Example 3 See also 4 References 5 External links Four ways costs can be capital expenditures[edit] The Internal Revenue Code, Treasury Regulations (including new regulations proposed in 2006), and case law set forth a series of guidelines that help to distinguish expenses from capital expenditures, although in reality distinguishing between these two types of costs can be extremely difficult. In general, four types of costs related to tangible property must be capitalized:[5] 1. Costs that produce a benefit that will last substantially beyond the end of the taxable year.[6] 2. New assets that have a useful life substantially beyond one year.[3] For example, in Commissioner v. Idaho Power Co.,[7] the taxpayer used its own equipment...
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...I am going to describe the testing for control over the expenditure cycle. The expenditure cycle starts with the purchase requisition. The department in need of the service or assets sends a properly approved, serially numbered requisition to the purchasing department. The risk associated with the purchase requisition is that anyone could potentially make a purchase requisition order for any kind of amount. Therefore, to mitigate a risk associated with the purchase requisition, it is very important to have the right personnel to approve the purchase order. When I tested the expenditure cycle, I randomly chose the purchase requisition and I followed every step associated with that cycle and in In addition, I documented every step of my testing by describing every significant detail related to my testing. Also, I performed walkthrough by talking to the right personnel and asking them questions associated with my testing. That help me not only to better understand the entity’s business cycle but made my testing more reliable since I could determine appropriate segregation of duties among the personnel. The purchasing department should place the order after giving proper consideration to the time and quantity to order. The purchasing department should also obtain competitive bids from various suppliers to make sure the best price is obtained. The purchase order is issued only after proper approval. For the internal control purposes, it is best that prenumbered purchase order...
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...The four elements of financial management are planning, controlling, organizing and directing, then decision making. Planning allows the financial manager to identify the steps needed to become successful towards accomplishing an organization’s goals. The manager must identify objectives and steps to accomplish the goals. The financial manager then controls each department of the organization. One way to oversee a departments’ progress is by comparing past and current departmental reports. Organizing and directing go hand in hand, but before directing the financial manager must organize and research an organization’s resources. The purpose of evaluating resources, determines how effectively objectives are accomplished. Directing ensures the effective use of resources and providing supervision. Decision making allows the manager to make intelligent choices about accomplishing the goals of an organization. The generally accepted accounting principles or G.A.A.P. are accepted ways of reporting and recording organizations financial information .They are the rules used to arrange and regulate financial account reporting. G.A.A.P. includes recognition of revenue, balance sheets, and outstanding share amounts. Organizations are required to follow the principles when reporting their financial statements. Professional accountants must abide by ethical standards that standarize the way they conduct business.The Financial Accounting Standards Board, professional accounting...
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...DEFINITION OF EXPENDITURE FOR CAPITAL PURPOSES Previous Definition in Financial Procedure Rules The previous definition of capital expenditure was set out in Part IV of the Local Government and Housing Act 1989. All capital expenditure and financing must be in accordance with the provisions of the LGHA 1989 and the Local Authorities (Capital Finance) Regulations 1997. No leasing or credit arrangement as defined by the LA(CF)R 1997 shall be entered into without the approval of the Director of Finance. Any service using an asset will be charged with a cost of capital employed which represents interest foregone in owning the asset and depreciation, representing the proportion of the asset’s useful life consumed in the year in question. Current Position The LGHA has now effectively been replaced by the Local Government Act 2003 which defines capital expenditure as ‘expenditure that falls to be capitalised under proper practices’. It then goes on to define proper practices as meaning the CIPFA Recommended Practice (SORP) and any specific legislation. Specific legislation relating to capital expenditure tends to be defined in various Capital Finance Regulations. The SORP definition of capital expenditure is therefore supported by statute. However, it does not have a single definition of capital expenditure, but includes references to capitalising expenditure in various parts of the SORP. In the Fixed Assets section of the SORP expenditure that should be...
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...Expenditures and Revenues Summary: Palm Beach Sheriff’s Office Bianca Gerena AJS 522 Paula May May 26, 2014 Expenditures and Revenues Summary: Palm Beach Sheriff’s Office The Palm Beach Sheriff’s Office, a statutory government agency, is responsible for providing services to three mandated programs in Palm Beach County, Florida (PBSO.org, 2013). Those programs are Law Enforcement, Corrections Services throughout Palm Beach County’s jails, and finally Bailiff and Court staff. Palm Beach Sheriff’s office is required to respond to law enforcement calls throughout the county and all unincorporated areas of Palm Beach County. Palm Beach Sheriff’s office is also responsible for providing services to certain municipalities throughout Palm Beach County, if a contract exists between the municipality and the Sheriff’s office. The municipality must come to a fee agreement with the Palm Beach Sheriff’s office before a contract is established. The following will elaborate on the Palm Beach Sheriff’s Office revenue and expenditures and the impact of the expenditures on the revenue source. The following will also elaborate on who the key players are in terms of making budget decisions and whether or not there is any influence of political and public policies on the Palm Beach Sheriff’s Office. Finally, recommended organizational financial analysis alternatives for the Palm Beach Sheriff’s Office will be researched. The Impact of the Expenditures on the Revenue Source Palm Beach County...
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...Government Expenditure and Revenue by Ooi Soon Beng After studying this chapter, you should be able to understand: Public Budget Budget Deficits and Surplus Expansionary and Contractionary Fiscal Policy Discretionary and Automatic Fiscal Policy National Debts and Its Issues and Misconceptions Problems with Fiscal Policy : Macroeconomics According to Keynes, government has to intervene to stabilize the economy. Stabilization can be achieved in part by manipulating the Public Budget to increase output and employment or to reduce inflation. The Budget outlines the government’s taxation and expenditure plans for the coming fiscal year. The Ministry of Finance are responsible for the preparation of the budget. Sources of Revenues: Direct taxes on individuals and companies Indirect taxes on goods and services (gasoline, alcohol, tobacco, etc) Non-tax revenue (stamp duty, licenses, permits, etc) Malaysia: Sources of Revenue (in RM) 1990 2013 2014 Direct Taxes 35.2% 56.5% 59.1% Indirect Taxes 36.7% 16.6% 17.2% Non-Tax Revenue 28.0% 26.9% 23.7% Total Revenue 29,521m 207,913m 224,094m Source: Ministry of Finance Categories of Expenses: Operating Expenditure (emolument, pensions, debt servicing, grant to states, subsidies, supplies, scholarships, etc) Development Expenditure (security, social services, economic services, expenditure on goods...
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...daily incur revenue expenditures to upkeep their operating efficiency and productive life of an asset. Expenditures are unavoidable as well as they are very necessary to expand the business. Expenditures are payments of cash or cash equivalent for goods or services. The difference between revenue and capital expenditures is that revenue expenditures are expenses that are immediately charged against revenue as expenses. Regular and periodic repairs are revenue expenditures because they are charged directly to specific accounts. Examples of these accounts would be Repairs and Maintenance Expense. Capital expenditures are expenditures will increase the company’s investment primarily in productive facility. A capital expenditure is an amount spent to attain or improve a long term asset such as buildings or equipment. When recording capital expenditure, it is usually recorded in accounts classified or titled as Property, Plant and Equipment. Generally, because capital expenditures provide income for the company over a period of years, companies are not allowed to deduct the full cost of the asset in the year the expense is incurred. Revenue expenses typically are shorter term expenses because they always required to meet the ongoing operational costs of running a business. (Investopedia, 2015) The contrasting factor of capital and revenue expenditures is that revenue expenditures can be fully tax deducted in the same year the expense occurred. Revenue expenditures can be considered...
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...Capital Expenditures & Revenue Expenditures Veronica rowe XACC/291 Jan 29, 2014 Shontell Chrisman Capital Expenditures & Revenue Expenditures Capital expenditures; a sum spent to procure or development of a long term asset, such as buildings or equipment. Under normal accounting methods the cost is put under equipment, plant, property. Everything except the cost of land can be charged as depreciation expenditure over the useful life of the asset. Capital expenditures are put on financial report as an asset on balance sheet. Capital expenditure rewards are spread over several accounting periods. Capital expenditures can include replacement cost to delivery cost, legal charges and everything in between. Revenue expenditures; are amounts distributed out instantaneously, they match entries of the existing accounting period. Scheduled maintenance is a revenue expense, because they are charged without waiting to an account like maintenance and repairs expenditures. Major repairs do not affect the life of the asset. Revenue expenditures are put on financial report on the income statement. Revenue expenditures may include maintenance charge, repair, and renewal and everything in between. Both are classified as assets. The difference between the source of Capital and Revenue expenditures is special, because Capital is comprised of cost related to fixed assets, and Revenue expenditures affect is temporary, they come often and contains no physical presence, and does not...
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...declined post the 1st quarter in 2000, CFO Sullivan used the following accounting tactics to achieve targeted performance: 1. Accrual releases: Accounting principles require companies to estimate expected payments from line costs and match them with revenues in the income statement. Throughout 1999 and 2000, Sullivan told staff to release accruals which too high compared to the relative cash payments. Over a 7 quarter period between 1999 and 2000, Worldcom released $3.3 billion worth of accruals. 2. Expense capitalization: The above tactic could not be used by the end of 1st quarter of 2001 as few accruals were left to release. Sullivan devised a creative solution which started identifying costs of excess network capacity as capital expenditure rather than as an operating cost....
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