What are revenue expenditures and factors considered in determining it?

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Revenue expenditures are those expenditures which are incurred in normal business operations by an organization/company.

In other words, revenue expenditures are the sum of expenses which are incurred in production of goods and expenses incurred in services in an accounting period. Benefits of revenue expenditure received in the same period.

Revenue expenditure will not add in profits, but these are helpful in maintaining day to day operational activities and managing assets in a better way. These are also known as OPEX/revenue expenses.

Types

The types of revenue expenditures are as follows −

  • Maintaining asset (revenue generated) − Repairs and maintenance.
  • Revenue generating − Expenses to operate day to day business.

Examples

The examples of revenue expenditures are listed below −

Direct expense
Indirect expenses
Wages (direct)
Salaries
Shipping charges
Interest
Import duty
Repairs
Freight charges
Rent
Rent
Taxes
Legal expenses
Depreciation
Electricity cost
Other miscellaneous expenses

Considerations

The factors which determine the revenue expenditures are given below −

  • Nature of business − Amount spent on purchase of goods.
  • Revenue generation − Revenue generated in current accounting period.
  • Purpose − Expenditure spent for asset maintenance.
  • Materiality − Amount is immaterial.

Significance and Challenges

The significance of the revenue expenditure and the challenges faced with regards to this expenditure are explained below −

Significance
Challenges
Identifies indispensable costs, unessential expenses.
Limited to current accounting period.
Firms’ proficiency is determined.
Does not provide accurate overall financial standing.
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Published on 08-Jul-2021 07:14:57
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