Judy Brooks recently opened a restaurant. Some of her items of expenditure are listed below. Complete the table by putting a tick in those columns which are relevant to each item.

Items of expenditure

(a) Purchase of premises

(b) Wages

(c) Insurance

(d) Purchase of equipment

(e) Gas and electricity

(f) Purchase of china

(g) Advertising

(h) Repairs to equipment Capital Revenue Used in measuring profit You must not assume that the distinction between what counts as capital expenditure and as revenue expenditure is always clear cut. We referred earlier (page 34) to the concept of depreciation, which is the reduction in the value of a fixed asset resulting from its use. For example, some kitchen equipment bought by Judy for her restaurant might have an estimated working life of five years. She (or her accountant) might decide that, each year, one fifth of the cost of this equipment should be deducted from that year's profits to allow for its depreciation in value. One fifth of the asset's cost will be removed from the asset account and transferred to an account for depreciation. This depreciation will then be counted as one of the items of revenue expenditure for that year and deducted from the year's income in order to obtain the profit figure. We will consider this in more detail in Chapter 11. For now, it is enough if you recognise that even the purchase of a fixed asset, which counts as capital expenditure, may directly result in an expense which is included in the calculation of profit.