Revenue Expenditure Meaning In Accounting

A revenue expenditure also called an income statement expenditure is a cost related to assets that are not capitalized because they will not provide a financial benefit in future periods.

Revenue expenditure meaning in accounting. In other words revenue expenditures are extra expenses incurred because of an asset but they don t add any additional value to the asset or. They are considered significant for generating revenue in a given accounting period. All the expenditures which are incurred in the day to day conduct and administration of a business and the effect of which is completely exhausted within the current accounting year are known as revenue expenditures. Revenue expenditures are often discussed in the context of fixed assets.

Revenue expenditure meaning can be defined as the summation of all expenses incurred by a business through the course of production of its goods and services. Expenditures are classified into revenue expenditure and capital expenditure in accordance with the matching concept of accounting which stipulates that. Definition of revenue expenditure. In the production of goods and services and its sale which facilitates revenue generation of the company.

Revenue expenditures are short term expenses used in the current period or typically within one year. Revenue expenditure also known as operating expenses or opex refers to the expenditure incurred in the course of the day to day business activities i e. Revenue expenditure incurred on fixed assets include costs that are aimed at maintaining rather than enhancing the earning capacity of the assets. The revenue expenditures take place after a fixed asset had been put into service and simply keeps the asset in working order.

It is not recorded as an asset on balance sheet because it is expected to benefit the company only in the period in which it is incurred. These are costs that are incurred on a regular basis and the benefit from these costs is obtained over a relatively short period of time. A revenue expenditure revex is a cost that is charged to expense as soon as the cost is incurred. By doing so business is using the matching principle to link the expense incurred to revenues generated in the same reporting period.