Quick Summary
Revenue Expenditure is expensed immediately in the Profit & Loss Account and does not create long-term assets.
Revenue Expenditure refers to expenses incurred in the day-to-day running of a business that provide benefits only for the current accounting period. These are charged to the Profit & Loss Account in the same period.
Examples of Revenue Expenditure
- Salaries and wages
- Rent and utilities
- Repairs and maintenance (routine)
- Advertising and marketing
- Raw materials and consumables
- Insurance premiums
- Travel and entertainment
- Office supplies
Key Characteristics
- Benefits expire within one accounting year
- Does not enhance asset value
- Expensed in P&L immediately
- Reduces taxable income in same year
- Shown as deduction from revenue
Revenue vs Capital Expenditure
| Aspect | Revenue Expenditure | Capital Expenditure |
|---|---|---|
| Duration | Short-term (within year) | Long-term (multiple years) |
| Accounting | Expensed immediately | Capitalized, then depreciated |
| Financial Statement | P&L Account | Balance Sheet |
Deferred Revenue Expenditure
Some revenue expenditures have benefits extending beyond one year but are not large enough to capitalize. These are called Deferred Revenue Expenditure and are amortized over multiple years (e.g., heavy advertising for product launch).
Key Points
- Expensed in the same accounting period
- Benefits expire within one year
- Shown in Profit & Loss Account
- Reduces taxable income immediately
- Contrast with Capital Expenditure