Revenue Expenditure. [July 2021, 2 Marks]
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Theoretical FrameworkQuestion 4959 of 110
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Detailed Solution & Explanation
* An item of expenditure whose benefit expires within the year or expenditure which merely seeks to maintain the business or keep assets in good working conditions is revenue expenditure.
* Examples are: Salaries and Wages, power used to drive machinery, electricity used to light the factory or offices, etc.
* Such expenditure does not increase the efficiency of the firm, nor does it result in any acquisition of fixed asset.
* Diminution in the value of assets due to wear and tear or passage of time is revenue expense. * For instance, a piece of machinery is bought in the beginning of the year for rs 10,000. At the end of the year its value to the business may only be 9,000. This diminution in value (rs ) is a revenue loss. * Stocks of materials bought will be an asset unless consumed, to the extent the materials are used up, they will be revenue expenditure.
* Capital expenditure are shown in the Balance Sheet as assets whereas revenue expenditures are debited to P&L A/ c.
* Diminution in the value of assets due to wear and tear or passage of time is revenue expense. * For instance, a piece of machinery is bought in the beginning of the year for rs 10,000. At the end of the year its value to the business may only be 9,000. This diminution in value (rs ) is a revenue loss. * Stocks of materials bought will be an asset unless consumed, to the extent the materials are used up, they will be revenue expenditure.
* Capital expenditure are shown in the Balance Sheet as assets whereas revenue expenditures are debited to P&L A/ c.
About This Chapter: Theoretical Framework
Paper
Paper 1: Accounting
Weightage
5-10%
Key Topics
Policies, Standards (Ind AS), Vocabulary
This chapter covers Policies, Standards (Ind AS), Vocabulary and is part of Paper 1: Accounting in the CA Foundation exam.
View Official ICAI SyllabusExam Strategy Tip
This topic carries 5-10% weightage. Focus on understanding core concepts rather than memorizing.
Key Concepts to Understand
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