Capital Charges VS. Earnings Charges



one. Nature of Belongings procured

Any expenditure incurred to acquire a preset asset or in relationship with set up (costs for set up) of preset asset is cash expenditure.

Any expenditure incurred as selling price of products procured for resale together with other required costs incurred in relationship with such acquire are profits costs.

2. Discharging Liability

A payment produced by a human being to discharge a capital  liability is a cash expenditure

An expenditure incurred to discharge a profits liability is profits expenditure

three. Based on Transactions

If expenditure is incurred to acquire a supply of income, it is cash expenditure e.g., acquire of patents to deliver photograph tubes of Television set established.

An expenditure incurred to earn an income is profits expenditure. E.g.  salary, ad and many others.

4. Goal of Transactions

If the total is expended on growing the earning capability of an asset it is cash expenditure

Any expenditure incurred on retaining an asset in operating situation is profits expenditure

5. Nature of Payments in the hands of payer

If the costs is incurred for attaining cash asset from profits receipts is also handled as cash expenditure

If the nature of payment in the hands of payer is of profits nature, it will be profits expenditure.


  1. Charge of reconstructing, refurnishing, and many others. of a business constructing.
  2. Payment produced with a check out to retaining his competitor out of his industry of business enterprise
  3. Expenditure incurred in converting business premises when switching above from manufacture of a person merchandise to a different.
  4. Expenditure on litigation in relationship with attaining or curing defective belongings of the business.
  5. Payment paid out for cancellation of agreement for the acquire of equipment.
  6. Price paid out for the acquire of partner’s share in the agency.
  7. Expenditure incurred on the maintenance of business reputation


  1. Payment produced for use of quota rights, or for use of patents and trade marks.
  2. Payment produced for technical help.
  3. Expenditure incurred to deliver staff members abroad for functional training    
  4. Repairs and maintenance incurred for equipment
  5. Discharging payment deal to the staff members
  6. Expenditure incurred in elevating loans, e.g., stamp duty, registration and authorized costs, brokerage and many others.
  7. Any such expenditure incurred wholly, fully, essentially for the business.