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P2 C9 Accounts ol‘Non—trading Concerns — Account STD 11 Commerce — Question

Gujarat BoardEnglish MediumSTD 11 CommerceAccountP2 C9 Accounts ol‘Non—trading Concerns3 Marks
Question
Explain classification of expenses of a non-trading concern with illustrations.
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Answer

$(1)$ Capital expense $(2)$ Revenue expense $(3)$ Deferred revenue exp. $(1)$ Capital Expense: Expense which is not incurred regularly and the benefit of whichis available to the concern for a longer period of time from which fixed assets areacquired by the concern is known as capital expense. e.g. Permanent assets likeland, ground, books, sports equipment, expenses of furniture, legal work expenses, installation expenses, connection of electricity etc. are capital expenses. Capital expenseis disclosed at the asset side of the balance sheet. $(2)$ Revenue Expenses: Expense which is incurred on regular basis to run a routineactivity of the concern and the benefit of which is available to the concern for therespective year only is known as revenue expenses. e.g. Daily administrative expenseslike salary, rent, postage, insurance, premium, stationery and printing, depreciation,loss on sale of asset, expenses of canteen, repairing expenses etc. are revenue expenses.Revenue expense is disclosed on the debit side of income-expenditure account. $(3)$ Deferred Revenue Expense: The benefit of revenue expense is for that respectiveyear, which it is paid. Thus writing off these expenses as the revenue expense of thatyear in which they are incurred, they are allocated to the predetermined number ofexpense at higher level, primary expenses etc. are diferred revenue expense. Theamount written off is disclosed at the debit side of income-expenditure account. Theportion of this expense, which is not written off is disclosed on the asset side at theend of the balance sheet.

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