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Question
What is revenue expenditure?
Solution 1
Expenditure by the government which does not create any assets for the government and does not reduce the liability of the government is called revenue expenditure. Hence, subsidies are treated as revenue expenditure as they do not reduce the liability of the government and do not add to the assets of the government.
Solution 2
- The expenditure incurred for day to day running of the business or for maintaining the earning capacity of the business is known as revenue expenditure.
- It is recurring in nature. It is incurred to generate revenue for a particular accounting period. The revenue expenditure may be incurred in relation to revenue or in relation to a particular accounting period.
- For example, the cost of purchases is a revenue expenditure related to sales revenue. Rent and salaries are related to a particular accounting period.
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