Revenue Expenditure
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Revenue Expenditure

Revenue Expenditure Revenue expenditure means the expenditure the benefit of which is exhausted within the current year. Such expenditure is of a recurring nature and does not result in the acquisition of permanent assets. Revenue expenditure is incurred for meeting day to day requirements of business. Revenue expenditure does not add to the earning capacity of the business but only helps in maintaining the existing earning capacity. All expenses incurred on day-to-day administration of a firm and the effect of which is completely exhausted within the current accounting are called revenue expenditure.

Revenue Expenditure

Revenue expenditure means the expenditure the benefit of which is exhausted within the current year. Such expenditure is of a recurring nature and does not result in the acquisition of permanent assets. Revenue expenditure is incurred for meeting day to day requirements of business. Revenue expenditure does not add to the earning capacity of the business but only helps in maintaining the existing earning capacity. All expenses incurred on day-to-day administration of a firm and the effect of which is completely exhausted within the current accounting are called revenue expenditure. Revenue Expenditure is basically expenses shown in the profit and loss of the company whereas Capital expenditure is sown in the balance sheet of the company. A company cannot function smoothly without incurring revenue expenditure.

The following types of expenses incurred by the company or a firm are included in revenue expenditure.

• Expenses incurred for the day-to-day running of the business : These expenses do not yield any benefit beyond the current year and their effect is short-lived, e.g. rent, salaries, wages, power and fuel, etc. These expenses do not add to the profit earning capacity of the business.

• Expenses incurred for the upkeep of fixed assets : Fixed assets represent capital expenditure but expenses incurred to keep them in good working condition such as repairs and maintenance, are revenue expenditure. Legal expenses incurred to defend the ownership of fixed assets are also revenue expenses.

• Expenses incurred on purchase of stocks of materials and goods : These include the goods purchased for resale and raw materials purchased for converting them into finished goods. The amount used during the year is revenue expenditure and the remaining amount will be an asset.

• Depreciation on fixed assets : Fixed assets lose part of their value every year due to wear and tear and even with passage of time. Such reduction in value is called depreciation and it is treated as a revenue expense.

• Loss from sale of fixed assets also account for revenue Expenditure,

• Replacement of worn out parts of existing machines.

• Interest on loan and interest on capital for the period after the asset is put to use.

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