Capital vs Revenue Expenses
Revenue Expenses
Revenue expenses are costs incurred in the day-to-day running of the business. They are fully deductible in the year incurred.
- Examples: rent, utilities, salaries, office supplies
Capital Expenses
Capital expenses are costs incurred to acquire, improve, or extend the life of a capital asset. They are not immediately deductible but may qualify for capital allowances or depreciation.
- Examples: machinery, buildings, vehicles, computers
Treatment
- Revenue expenses → deducted immediately
- Capital expenses → depreciated over useful life (aligned with IFRS)
Repairs vs Improvements
- Repairs (maintain asset) → revenue expense, deductible
- Improvements (enhance asset) → capital expense, depreciated