Explain revenue expenditure

Expenditures will be treated as revenue expenditures if it is incurred for the following purposes:

1. Expenditure for purchasing floating assets i.e., assets meant for resale at a profit or for being converted into selling goods, such as the cost of goods, raw materials and stores.

2. Expenditures incurred by maintaining assets in proper working order e.g., repairs to plant and machinery, building furniture and fittings etc.

3. Expenditures incurred for meeting day to day expenses of carrying on a business e.g., salaries, rent, rates, taxes, stationery, postage etc.

All revenue expenditures have to be deducted from the income earned by the firm. That is to say, all revenue items will be taken to the profit and loss account.