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WHAT IS REVENUE EXPENDITURE?
Revenue expenditure is recognisable when the expense is incurred in running the business on a day to day basis. Unlike Capital expenditure, revenue expenditure is not recognisable when a business spends money on enhancing the worth or value of fixed assets. The main difference between revenue expenditure and capital expenditure can be demonstrated with the total cost of operating a motor vehicle. Initially acquiring the motor vehicle for the business is an example of capital expenditure. This is because the vehicle will be in the business for use for at least a few years and therefore is a fixed asset. On the other hand, paying for petrol to use in the motor vehicle will be a revenue expenditure. This is mainly because the petrol or expenditure will be used up in a short time and does not add long term value to the fixed asset. Additionally, it is fundamental that there is a correct distinction between capital and revenue expenditure as this is essential to determine a correct value for the profit and assets of a business.
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DISCLAIMER
Our content is to be used as an EDUCATIONAL TOOL that aims to provide a foundation for individuals to learn financial accounting, management accounting and bookkeeping topics as practiced in the United Kingdom. As a result, not all complexities are shown or provided. Examples may include but are not limited to; differences between financial reporting, accounting standards or tax treatments. We are NOT ENGAGED in the providing of accounting, bookkeeping, financial, investment, tax, or other professional services. You should consult with a qualified or professional such as an accountant, business advisor, investment specialist, lawyer, solicitor, etc., with regards to specific facts and situations.
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