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Hello John, thanks for the lectures. In the lectures, you said a capital expenditure is when we purchase a non-current asset. Is it also a capital expenditure when we purchase inventory (which is a current asset)?
No – that is revenue expenditure (when we buy it, it is purchases. Inventory is what is left of the purchases at the end of the period).
Just to clarify, even if it appears on the SOFP as a current asset, it is still a Revenue Expenditure, as only Non-current assets expenditures qualify to be capital expenditures?
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