Difference between Capital and Revenue - Essay Example

Capital and Revenue In financial accounting there are a number of distinguishing terms that aid an organization and its accountants keep better and efficient records. Two of these notable accounting terms are capital and revenue. While the terms share similar traits they differ in crucial ways. Both terms refer to funds the organization has on hand. Revenue is the funds that are implemented on a daily or frequent basis. One considers that revenue can constitute a number of wide ranging purposes, all of which are contingent on the specific organization (‘What is a capital expenditure versus a revenue expenditure’ 2010).

For instance, revenue can be funds that go towards staffing, utilities, daily supply, or purchases of services for external providers. In financial accounting these costs are referred to as revenue expenditures. These sorts of expenditures can be contrasted with capital. Capital, while physically constituting the organizations’ operating funds just like revenue, is spending that goes towards long-term assets. One recognizes that just like revenue expenditures, capital expenditures can constitute a variety of things.

The main understanding that differentiates revenue expenditures from capital expenditures, however, is that capital expenditures are things that will last or have a shelf life for a number of years (‘What is a capital expenditure versus a revenue expenditure’ 2010). For a technology company, capital expenditures could constitute everything from buildings to expensive information technology platforms. For an oil company such as EXXON, capital expenditures would be deep-water oilrigs, pipelines, or other such long-term investments.

References‘What is a capital expenditure versus a revenue expenditure.’ (2010) Blog.accountingcoach.com