Define and explain revenue expenditures
Definition and Explanation:
Expenditures will be treated as revenue
expenditures if it is incurred for the following purposes:
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.
Expenditures incurred by maintaining assets in
proper working order e.g., repairs to plant and machinery, building
furniture and fittings etc.
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
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
Expenses for the manufacture and distribution
of the finished goods.
Loss from wear and tear and obsolescence of
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.