Accounting concepts & Capital and Revenue expenditure 10.1 What is meant by the 'money measurement concept? 10.2 Explain the concept of prudence in relation to the recognition of profits and losses. 10.3 Explain the term 'materiality' as it is used in accounting. 10.4 The historical cost convention looks backwards but the going concern convention looks forwards. Required: (a) Explain clearly what is meant by: 6) the historical cost convention; (ii) the going concern convention (b) Does traditional financial accounting, using the historical cost convention, make the going concern convention unnecessary? Explain your answer fully. (c) Which do you think a shareholder is likely to find more useful - a report on the past or an esti- mate of the future? Why? 24.2A Indicate which of the following would be revenue items and which would be capital items in a wholesale bakery: (a) Purchase of a new van. (b) Purchase of replacement engine for existing van (c) Cost of altering interior of new van to increase carrying capacity. (d) Cost of motor tax for new van. (e) Cost of motor tax for existing van in Cost of painting business's name on new van. (c) Repair and maintenance of existing van 24.4A On what principles would you distinguish between capital and revenue expenditure? illustrate your answer by reference to the following: (a) The cost of repairs and an extension to the premises. (b) Installation of a gas central heating boiler in place of an oil-fired central heating boiler. (c) Small but expensive alterations to a cigarette manufacturing machine which increased the machine's output by 20%