Revenue Expenditure

2. Revenue Expenditure

Revenue Expenditure is expenditure whose benefit is fully consumed WITHIN the accounting year in which it is incurred. It is charged in full to the Trading Account or the Profit and Loss Account of that year, and never appears as an asset on the Balance Sheet.

Categories of Revenue Expenditure, with examples:

1. Expenditure for day-to-day conduct of the business — rent, salaries, insurance premium, printing and stationery, telephone charges.
2. Cost of goods purchased for resale — Purchases (the largest single revenue expenditure for a trading business).
3. Expenditure to maintain a fixed asset in its existing working condition (as opposed to improving it) — repairs to machinery, renewal of a licence, white-washing of a building, routine servicing of a vehicle.
4. Depreciation on fixed assets — the portion of a fixed asset's cost consumed during the current year, charged as a revenue expense even though the asset itself is a capital item.
5. Interest on borrowed funds and other financing costs of the current year.