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Revenue Expenditure

An amount spent for earning or providing revenue is called revenue expenditure. Revenue expenditure is one which constitutes a proper deduction from income or revenue. It is an expense. In other words, all establishment and other expenses incurred in the conduct and administration of the business come under the heading of revenue expenditure.

All expenses incurred by way of repairs, replacement of existing assets, which do not in any way add to their earning capacity but simply serve to maintain the original equipment in an efficient working order are charged to revenue.



a) Expenses incurred in the normal course of business, e.g., expenses of administration, expenses incurred in manufacturing and selling products. Examples of such expenses are salaries, rent, insurance, postage, stationery and repairs to assets.

b) Expenses incurred to maintain the business, e.g., replacements for maintaining the existing permanent assets, cost of stores consumed in the course of manufacturing, e.g., oil, cotton-waste, machinery spares consumed and amount spent on replacement of worn-out parts of  a machine

c)   Cost of goods purchased for resale.

d) Depreciation on fixed assets, interest on loans for business, loss from sale of fixed asset.


Deferred Revenue Expenditure

A heavy expenditure of revenue nature incurred for getting benefit over a number of years is classified as deferred revenue expenditure.

Preliminary expenses, brokerage on issue of shares and debentures, discount on issue of shares or debentures, exceptional repairs, heavy advertisement, expenses incurred in removing the business to more convenient premises, are examples of such expenses which are essential for carrying on the business and thus revenue in nature.

Nevertheless, the formidable amount of these expenses does not permit to write it off from the profit of one financial year as it will, if attempted, wipe off the complete or major portion of the profit. In order to maintain steady growth, it is desirable that such expenses may be taken to profit and loss account in part every year and thus unwritten off portion may be allowed to stand in the balance sheet on the asset side. This treatment is also justifiable on the ground that benefit of such expenses is likely to extend beyond the year in which it takes place and each of these years concerned be burdened with a proportionate share of  such expense.

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