Revenue Expenditure Recorded In

By doing so a business is using the matching principle to link the expense incurred to revenues generated in the same reporting period.

Revenue expenditure recorded in. The new machine requires routine maintenance of 3 000 each month. 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 these expenditures are recurring by nature i e. Which are incurred for meeting day today requirements of a business and the. Expenditures are classified into revenue expenditure and capital expenditure in accordance with the matching concept of accounting which stipulates that.

This 3 000 is a revenue expenditure since it will be reported on the monthly income statement thereby being matched with the month s. Revenue expenditure is expenditure which is expensed out in the period in which it is incurred. Revenue expenditures are recorded in the a manufacturing account b trading account c profit loss account d all of the above. Revenue expenditure is the sum of the expense that the business incurs in the production of goods and services which helps for revenue generation of the company in an accounting period.

Example of revenue expenditure. Let s assume that a company made a capital expenditure of 100 000 to install a high efficiency machine. If the expenses made by the firm helps in the generation of revenue for the current accounting period it is considered as an operational expense. Revenue expenditure is usually recurring expenditure on the day to day trading activities of the business.

The expenditure is short term and is included in the income statement for the current accounting period. Furthermore as per the matching principle the expense should be matched with the revenue earned during the period to be regarded as revenue expenditure. A revenue expenditure is a cost that is charged to expense as soon as the cost is incurred. To test your knowledge of identifying capital and revenue expenditure why not try our capital or revenue expenditure quiz.

There are two types of revenue expenditure.