Revenue expenditures consist of those expenditures, which are incurred in the normal course of business. It is an amount that is expended immediately—thereby being matched with revenues of the current accounting period. They are incurred in order to maintain the existing earning capacity of the business. It helps in the upkeep of fixed assets. Revenue expenditures are often discussed with costs spent on fixed assets after they have been placed in service. Generally it is recurring in nature.
There are two types of revenue expenditure:
- Maintaining a revenue generating asset. This includes repair and maintenance expenses, because they are incurred to support current operations, and do not extend the life of an asset or improve it.
- Generating revenue. This is all day-to-day expenses needed to operate a business, such as sales salaries, rent, office supplies, and utilities.
Characteristics
- It helps in maintaining the earning capacity of the business concern.
- It is recurring in nature.
Examples
- Cost of goods purchased for resale.
- Office and administrative expenses.
- Selling and distribution expenses.
- Depreciation of fixed assets, interest on borrowings etc.
- Repairs, renewals, etc.
