Capital Expenditure:

Capital expenditure refers to the expenses incurred by a company in acquiring, upgrading, or maintaining long-term assets that are expected to generate benefits over an extended period. These assets are typically used in the production process or for providing goods and services to customers. Capital expenditures are significant investments made by a company and are recorded on the balance sheet as long-term assets.

Key Points:
- Long-term assets: Capital expenditures are made on assets that have a useful life of more than one year. These assets include property, plant, and equipment (PP&E), such as land, buildings, machinery, and vehicles.
- Enhancing or expanding business: Capital expenditures are made with the aim of enhancing or expanding the company's operations. For example, a manufacturing company may invest in new machinery to increase production capacity.
- Cash outflow: Capital expenditures require a significant cash outflow. Companies often need to raise funds through external sources, such as debt or equity financing, to finance these investments.
- Depreciation: The costs of capital expenditures are allocated over their useful life through depreciation. This helps in matching the expenses with the revenues generated by the assets.
- Examples: Some examples of capital expenditures include the purchase of a new factory, investment in research and development, acquisition of land or buildings, and the expansion of production facilities.

Revenue Expenditure:

Revenue expenditure refers to the day-to-day expenses incurred by a company in its regular operations to maintain its current level of business activity. These expenses are typically incurred within a short period and are recorded on the income statement as operating expenses.

Key Points:
- Operating expenses: Revenue expenditures are expenses directly related to the ongoing operations of the business, such as salaries, rent, utilities, advertising, and maintenance costs.
- Short-term benefits: Unlike capital expenditures, revenue expenditures do not lead to the acquisition of long-term assets. They are incurred to generate immediate benefits and maintain the current level of business activity.
- Deductible expenses: Revenue expenditures are fully deductible from the company's taxable income in the year in which they are incurred. This reduces the company's tax liability.
- Examples: Some examples of revenue expenditures include employee wages, rent payments, utility bills, office supplies, insurance premiums, and marketing expenses.

Difference between Capital Expenditure and Revenue Expenditure:

The key difference between capital expenditure and revenue expenditure lies in the nature and purpose of the expenses. Capital expenditures involve significant investments in long-term assets that enhance or expand the business, while revenue expenditures are day-to-day expenses incurred to maintain the current level of operations. Capital expenditures are recorded as long-term assets on the balance sheet and are depreciated over time, whereas revenue expenditures are recorded as operating expenses on the income statement and are fully deductible in the year of their occurrence.