What is a revenue expenditure?

Definition of Revenue Expenditure

A revenue expenditure is a cost that will be an expense in the accounting period when the expenditure takes place.

Revenue expenditures are often discussed in the context of fixed assets. The revenue expenditures take place after a fixed asset had been put into service and simply keeps the asset in working order. (The amount spent to acquire a fixed asset is referred to as a capital expenditure. The amount of the capital expenditure will be recorded as an asset and will then be moved to the income statement as depreciation expense over the years of the asset's useful life.)

Example of Revenue Expenditure

Let's assume that a company made a capital expenditure of $100,000 to install a high efficiency machine. The new machine requires routine maintenance of $3,000 each month. This $3,000 is a revenue expenditure since it will be reported on the monthly income statement, thereby being matched with the month's revenues. Normal repairs to the machine are also a revenue expenditure, since the expenditure does not make the machine more than it was, nor does it extend the machine's useful life. As a result, normal repairs will also be reported on the income statement as an expense in the accounting period when the repair is made.

Free Financial Statements Cheat Sheet

353,307
Subscribers
You are already subscribed. This offer is not available to existing subscribers.
Error: You have unsubscribed from this list.
Step 2: Please check your email.