Expenditures
An expenditure is a payment or an obligation to make future payment for an asset or a service.
A capital expenditure is made for the purchase or expansion of a long-term asset.
A revenue expenditure is related to the repair, maintenance, and operation of a long-term asset.
Careful distinction between revenue and capital expenditures is important to the proper application of the matching rule.
- Understatements and overstatements of income can occur.
Determining when a payment is an expense and when it is an asset is a matter of management judgment.