Revenue Expenditure

Revenue Expenditures:

Learning Objectives:

1. Define and explain revenue expenditures

Definition and Explanation:

Expenditures will be treated as revenue expenditures if it is incurred for the following purposes:

1. Expenditure for purchasing floating assets i.e., assets meant for resale at a profit or for being converted into saleable goods, such as the cost of goods, raw materials and stores.
2. Expenditures incurred by maintaining assets in proper working order e.g., repairs to plant and machinery, building furniture and fittings etc.
3. Expenditures incurred for meeting day to day expenses of carrying on a business e.g., salaries, rent, rates, taxes, stationery, postage etc.

All revenue expenditures have to be deducted from the income earned by the firm. That is to say, all revenue items will be taken to the profit and loss account.

List of Revenue Expenditures - (Examples of Revenue Expenditures):

The following is a list of the usual items of revenue expenditures:

• Expenses incurred for the ordinary administration and carrying on the business.
• Expenses for repairs, renewals and replacement of permanent assets.
• Cost of goods for resale.
• Cost of raw materials and stores acquired for consumption in course of manufacturing.
• Wages paid for manufacture of products for sales.
• Expenses for the manufacture and distribution of the finished goods.
• Loss from wear and tear and obsolescence of assets.
• Depreciation of lease.
• Interest on loans borrowed for business.
• Loss from sale of fixed assets.
• Fees for renewal of patent rights, etc.
• Up-keep and maintenance of motor car and van.
• Maintenance of fan and lights.
• Book value of assets discarded or totally damaged or destroyed by fire or other reasons.