Revenue Expenditure is the expenditure that is incurred to earn or to generate revenue during an accounting year. This expenditure is incurred for normal operating activities of the business and for its efficient or smooth working. In other words, this expenditure does not help in increasing the earning capacity, rather it helps to earn and generate the income from the business.
The benefits of this expenditure can be availed for a period of only one year in which such expenditure is incurred. These expenditures are incurred frequently by an organization and also include the decrease in the value of an asset in form of depreciation. This expenditure is shown on the debit side of the Trading and Profit and Loss Account. Some of the examples of such expenditure are rent, repairs, depreciation, loss on sale of fixed assets, etc.
Features of Revenue Expenditure
The given below are some features of revenue expenditure.
i. It is incurred to carry on day-to-day business activities.
ii. It does not result in increasing the earning capacity of an organization.
iii. It helps to maintain and improve the working capacity of the fixed assets but does not increase their value.
iv. The benefits from this expenditure are availed for a period of an accounting year in which it is incurred.
v. It is recurring in nature. That is, it is incurred on regular basis.
vi. It includes the decrease or fall in the value of an asset.
vii. It is shown on the debit side of the Trading and Profit and Loss Account.
YOU MAY READ
A promissory note is an unconditional promise in writing given by the buyer (or creditor) to the seller (or debtor) to pay the amount of money specified therein to the seller or to the order of seller or to bearer.
A Bill of Exchange is something that reduces our credit risk, Let’s understand this concept better with the help of an example; Omkar being
What are Reserves? The amount that is kept out of the profits of an enterprise to meet the future ‘unknown’ or ‘unexpected’ liabilities is known as reserve.
As per the Penguin Dictionary of Commerce ‘A provision is an amount written off or retained by way of providing depreciation, renewals, or diminution in the value of assets or retained