The amount spent to conduct the regular business activities is known as Revenue Expenditure. The benefit of this expenditure is received fully during an accounting period. All the revenue expenditures are debited to Trading and Profit and Loss account. These expenditures do not result in increasing the earning capacity of the business but only helps in maintaining the existing earning capacity.
ACCORDING TO WILLIAM PICKLES
“’Revenue expenditure is such outlay which is necessary for the maintenance of earning capacity including the upkeep of fixed assets in a fully efficient state and the normal cost involved in setting, including the cost of goods and services of the business to which it relates.”
ACCORDING TO G WILKINSON
“Revenue Expenditure is expenditure on items of resale and for immediate use i.e. stationery, rent etc.”
The following are regarded as Revenue Expenditure:
- Wages paid to factory workers.
- Oil to lubricate machines.
- Power required to run machine or motor.
- Expenditure incurred in the ordinary conduct and administration of business, i.e. rent, , carriage on saleable goods, salaries, wages manufacturing expenses, commission, legal expenses, insurance, advertisement, free samples, postage, printing charges etc.
- Repair and maintenance expenses incurred on fixed assets.
- Cost of saleable goods.
- Depreciation of fixed assets used in the business.
- Interest on borrowed money.
- Freight, cartage, Octroi duty, transportation, insurance paid on saleable goods.
- Petrol consumed in motor vehicles.
- Service charges to motor vehicles.
- Bad debts.
FEATURES OF REVENUE EXPENDITURE
TERM: This expenditure is done for short term.
AMOUNT: The amount of expenditure is usually less.
CAPITALIZATION: The amount of expenditure is not capitalized.
SHOWN IN: This expenditure is shown in Income statement i.e. Profit and Loss Account
OUTLAY: This expenditure is recurring in nature.
BENEFIT: The benefit is incurred for within an accounting year.
MATCHING CONCEPT: This expenditure is matched with revenue receipts.