The expenditure which is charged against revenue while preparing the profit and loss account is known as revenue expenditure. It means the expenses shown in the profit and loss account are called revenue expenditure.
The various types of revenue expenditure are explained in brief as follows:
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1. Expenses incurred for the day-to-day running of the business:
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These expenses such as rent, salaries, wages, power and fuel, etc do not yield any benefit after a very short period, at the most of a year. The expenses, therefore, must be incurred repeatedly. It may be noted that out of materials and goods purchased only a certain quantity remains on hand at the end of the year; the remaining quantity that has been sued up becomes revenue expenditure. A particular characteristic of revenue expenditure is that it does not add to the profit earning capacity but it helps in maintaining it at the correct level.
2. Expenses incurred for the upkeep of fixed assets:
Fixed assets are themselves capital expenditure but expenses incurred to keep them in good working order, such as repairs and maintenance, are revenue expenditure.
3. Expenses incurred on purchase of stocks of materials and goods:
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These expenditure to the extent of are used up during the year are coming under revenue expenditure, the remaining amount will be an asset.
4. Depreciation on or the expired cost of fixed assets:
Fixed assets certainly lose part of their value every year due to wear and tear and even passage of time. Such reduction in value is called depreciation and will be treated as revenue expenditure.