00:00 Hello viewers, I'm Mrs. Oyinloye and I'm to take you financial accounts. The topic

00:19 we're looking at is public sector accounts part four, behavioral objectives. At the end

00:26 of this lesson, Learner's will be able to differentiate between government-revenue expenditure and

00:32 capital expenditure. So, Learner's will be able to prepare statements of revenue,

00:39 expenditure and capital expenditure, preparation of statements of revenue, expenditure and capital

00:46 expenditure. In preparing statements of revenue, expenditure and capital expenditure,

00:52 there must be a separation between items that are capital in nature and those of revenue,

01:00 those and the revenue items. Now, what I mean is this. When items are revenue expenditure,

01:10 it means that they are recurrent expenditure. They are expenditure that takes place on a regular

01:16 basis and then items that are capital in nature are items that are more one-off

01:23 expenditure. Expenditure that takes place once in a while, maybe once in a year, maybe once in

01:30 10 years. It could be acquisition of assets, it could be construction of buildings or construction

01:36 of roads or bridges. Those are more capital in nature. So, you should be able to prepare

01:43 statements of capital and revenue expenditure. Let's look at this example from a

01:50 simplified account textbook. The following information were extracted from the books of

01:57 Miliki State, thinking of boroughs, 2.9 million Nira, purchase of Motoka 920,000 Nira,

02:06 stationery, 300,000 Nira, electricity, 45,000 Nira, purchase of ambulance, 1,134,500,000 Nira,

02:18 500 Nira, purchase of drugs, 76,000 Nira, purchase of incubators, 1,230,000 Nira, salaries,

02:28 3,250,000 Nira, purchase of beds, 425,000 Nira, repairs of motocas, 26,000 Nira, transport,

02:40 1,23,000 Nira, purchase of furniture, 67,000 Nira. You are required to prepare statements of

02:49 capital expenditure and recurrence expenditure. Now, let's look at the question before we solve.

02:58 Remember that we said that we have items that are recurrence in nature. In preparing the statements

03:06 of recurrence expenditure or statements of revenue expenditure, you pick out those items that are

03:12 recurrence in nature. Now, let's look at them one after the other, thinking of boroughs. Is this

03:19 something that is done regularly? No. So, it is more capital in nature. Purchase of Motoka is not

03:26 something that is done regularly. So, it's a capital expenditure. Stationery is something that we

03:33 do regularly. We use bairos, macas, and so on in organizations. So, that is recurrence in nature.

03:41 So, we can take that as recurrence expenditure. Electricity. Of course, we use electricity regularly.

03:49 So, we also pay for them regularly. So, we have electricity as also recurrence in nature. Purchase

03:58 of ambulance is not something that is done all the time. So, it's capital in nature. Purchase of

04:04 drugs is also recurrence because hospitals need drugs regularly. Purchase of incubators is not

04:14 something that is done regularly. So, it's capital in nature. Salaries is recurrence in nature.

04:20 Purchase of beds is also a capital item. So, it's not done regularly. Repairs to Motoka is recurrence

04:29 in nature. Transport is recurrence in nature. Okay. So, these items are recurrence in nature. So,

04:39 in preparing a statement of capital expenditure and recurrence expenditure, these items are items

04:45 that go for recurrence expenditure while the others will go for capital expenditure. So, let's

04:54 quickly prepare the question. Like I've explained to you, statements of capital expenditure will

05:01 include all those items that are capital in nature. While statements of recurrence expenditure

05:09 will include items that are recurrence in nature. Something you do regularly. And like we have

05:16 picked those items that are recurrence in nature. Let's go back and pick the items that are capital

05:23 in nature. We have the thinking of boroughs is a capital expenditure. Purchase of Motoka is a

05:30 capital expenditure. This is a recurrence expenditure recurrence expenditure. Purchase of ambulance is a

05:38 capital expenditure. Purchase of drugs is recurrence because we do it regularly. Purchase of incubators

05:46 is capital in nature. Salaries is a recurrence expenditure. Purchase of beds is a capital expenditure

05:55 repairs to Motoka is recurrence. Transport is recurrence while purchase of furniture is capital

06:05 in nature. So, now let's go and solve the question. Knowing that we have picked out items that are

06:11 capital in nature and we have picked out items that are recurrence in nature. The rest is simple.

06:18 Statements of capital expenditure. Those items that are capital in nature that we have

06:25 highlighted will bring them out and we highlight them one after the other. The first one, thinking

06:32 of boroughs. The value is 2.9 million nirah. Purchase of Motoka, 920,000 nirah. Purchase of ambulance,

06:42 1,134,500 nirah. Purchase of incubators, 1,233,000 nirah. Purchase of beds, 1425,000 nirah. Purchase of

06:57 furniture, 67,000 nirah. Now get your calculator and add everything together. That will give us 6 million,

07:04 600 and 76,500 nirah. You have solved that aspect of the question. Now let's go and solve the

07:12 second aspect and that is the statement of recurrence expenditure. Statements of recurrence expenditure

07:20 notes that your recurrence expenditure can also be termed revenue expenditure. So it depends on

07:29 what the question asks you to do if they are asking for revenue expenditure. You're also preparing

07:34 statements of recurrence expenditure. It's the same. So don't get confused. So in preparing the

07:40 statements of revenue expenditure or statements of recurrence expenditure, we pick out the items

07:45 that are recurrent in nature. Those things that we do regularly as a nation. We buy stationary

07:52 for whatever organization that is involved. Electricity. Now stationary here is 300,000 nirah.

07:59 Electricity, 45,000 nirah. Purchase of drugs, 76,000 nirah. Salaries, 3,250,000 nirah,

08:08 repairs to motoka, 26,000 nirah and transport, 123,000 nirah. Now use your calculator and calculate

08:17 everything. What we are going to get will be 3 million, 820,000 nirah. You have solved the question.

08:24 So a question asking you to prepare statements of revenue expenditure and capital expenditure

08:30 is only asking you a question that you separate items that are capital in nature from items that

08:38 are recurrent in nature which we have done in this question. Evolution. Now let's look at an exercise

08:46 that you will solve on your own to show that you understand the topic. The following information

08:52 was extracted from the Books of Ministry of Education for the year ended 31 December 1999.

08:59 Income. Federal Government allocation, 20 million nirah.

09:05 Financial Disposed of 1 million nirah. School fees, 3.5 million nirah.

09:11 Registration of private schools, 4.7 million nirah, rent from properties, 300,500 nirah.

09:20 Interest on fixed deposits, 60,300 nirah. Sales of motor vehicles, 150,500 nirah.

09:31 Expenditure, purchase of chairs, 2 million nirah. Purchase of books, 1 million, 250,000 nirah.

09:40 Construction of classrooms, 450,000 nirah. Sinking of balls for schools, 1 million, 250,000 nirah.

09:49 Purchase of buses for schools, 73,000 nirah. Purchase of logs, 15,230,000 nirah.

09:57 Maintenance of vehicles, 5,617 nirah. Stationary, 4,900 nirah. Transport, 20,500 nirah.

10:07 You are required, okay, we have medical expenses, 45,600 salaries and wages,

10:14 1,650,500 staff development, 32,300 excursions, 50,000, 15,400. Telephone and postage,

10:25 16,300 nirah. You are required to prepare revenue expenditure.

10:30 That is recurrent expenditure for the year ended 31 December 2000. Statement of capital and revenue

10:40 expenditure. Now, what this question is asking us first and foremost to do is that you are to prepare

10:47 the statements of recurrent expenditure. And how do you do that? You pick out items of recurrent

10:54 expenditure. You come to the expenditure items. You look at the items that are recurrent

10:59 in nature. Those things that are done repeatedly in the school. So, you pick out those items and

11:08 you prepare your statements of recurrent expenditure. Well, the second aspect of the question says

11:16 prepare statements of capital and revenue expenditure. The question is straightforward

11:23 and all you need to do is to pick out the items of revenue from that path, from all the items

11:29 that we have here, which you have been given already, and you have the items of expenditure

11:34 and you prepare your statements of capital and revenue expenditure. Thank you for watching.

11:41 I'm Mrs. Zoe Luier. Till next time.