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Is expenditure affecting the SOFP a capital expenditure? Chapter 2 subchapter 5

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › Is expenditure affecting the SOFP a capital expenditure? Chapter 2 subchapter 5

  • This topic has 3 replies, 2 voices, and was last updated 10 months ago by John Moffat.
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  • November 4, 2022 at 10:36 pm #670686
    Somtee
    Participant
    • Topics: 16
    • Replies: 5
    • ☆

    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)?

    November 5, 2022 at 8:36 am #670697
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 53174
    • ☆☆☆☆☆

    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).

    November 5, 2022 at 11:25 am #670709
    Somtee
    Participant
    • Topics: 16
    • Replies: 5
    • ☆

    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?

    November 5, 2022 at 4:22 pm #670725
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 53174
    • ☆☆☆☆☆

    The expenditure is revenue expenditure and inventory is a current asset.

    Capital expenditure is expenditure on non-current assets.

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