Expenditure whose benefit is consumed within the current accounting period and is charged to the Profit & Loss Account.
Revenue Expenditure refers to costs incurred in the normal course of business that maintain (but don't increase) the earning capacity of a business. These expenses are fully charged to the P&L in the period incurred — they are not capitalized as assets. Examples: salaries, rent, electricity, repairs & maintenance, advertising, office supplies, and raw materials consumed. The key distinction from Capital Expenditure: revenue expenditure maintains current operations while capital expenditure creates future benefits. Incorrect classification (capitalizing revenue expenses) overstates profit and assets — a common accounting fraud technique.
Company spends ₹5,00,000 on machine maintenance (Revenue Expenditure — maintains current capacity, charged to P&L) vs ₹50,00,000 on a new machine (Capital Expenditure — creates new capacity, added to Balance Sheet as asset and depreciated over useful life). The maintenance reduces current year profit by ₹5,00,000; the new machine reduces profit by only ₹10,00,000 depreciation/year over 5 years.
Ensures accurate financial reporting and record-keeping
Helps maintain regulatory and tax compliance
Enables better-informed business decisions
Improves operational efficiency and cash flow management
Ask: Does this spending CREATE new earning capacity or extend asset life significantly? If yes → Capital (Balance Sheet). Does it MAINTAIN existing operations without increasing capacity? If yes → Revenue (P&L). Example: Painting office walls (Revenue) vs adding a new floor to the building (Capital). Engine oil change (Revenue) vs engine replacement (Capital).
Large revenue expenditures whose benefit extends over 3–5 years but don't create a tangible asset — e.g., heavy advertising for a new product launch, preliminary expenses for company formation, or research costs. These are initially recorded as assets and amortized over the benefit period. Under modern standards (Ind AS), most are expensed immediately.
Funds spent by a business to acquire, upgrade, or maintain long-term physical assets such as property, equipment, or technology infrastructure.
The ongoing costs incurred by a business in its day-to-day operations, including rent, salaries, utilities, marketing, and administrative expenses.
A financial statement that summarizes a company's revenues, costs, and expenses over a specific period to show net profit or loss.
The systematic allocation of the cost of a tangible asset over its useful life, representing the decline in value due to wear, use, or obsolescence.
Payments made in advance for goods or services to be received in the future, recorded as current assets and expensed over the benefit period.
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