1) Distinguish between the accounting for capital expenditures and revenue expenditures.

According to the eBook for WarrenJonickSchneiders Financial Accounting, when considering the costs related to fixed assets revenue expenditures are costs that benefit the business only for the current period, and capital expenditures are costs that either improve or extend the useful life of the asset for current and future periods.

According to the Chapter 10 PowerPoint, revenue expenditures are recorded as an expense and capital expenditures are recorded as a decrease in accumulated depreciation. For example, funds paid for the tune up of a delivery truck are debited to Repairs & Maintenance Expense and credited to cash, whereas the overhaul of a forklift that extends the machines life are debited to Accumulated Depreciation and credited to cash.

The graph provided in both the eBook and PowerPoint shows that Capital Expenditure includes both 1) extraordinary repair that extends useful life of an asset, and improvements that add service value.

The course videos provide the same information explaining that there are two types of expenditures incurred on fixed assets as follows: 1) Revenue expenditures such as regular upkeep and maintenance of the asset are recorded as an expense and are debited to repairs and maintenance. 2) Capital Expenditures such as those that improve or extend the useful life of the asset are recorded as a debit to that asset accumulated depreciation account. If the assets life is extended, the associated accumulated depreciation account is debited or reduced. If the asset is improved, the associated accumulated depreciation account is debited or increased.

2) What topic did you find difficult to understand in this chapter?

There were lots of new concepts and topics for me in this chapter, so I found all of the chapters topics challenging. I found the exercises and videos very helpful, however, I still need lots of practice!

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