Rules for Determining Revenue Expenditure

Any expenditure which cannot be recognised as capital expenditure can be termed as revenue
expenditure. A revenue expenditure temporarily influences only the profit earning capacity of
the business. An expenditure is recognised as revenue when it is incurred for the following
purposes:
Expenditure for day-to-day conduct of the business, the benefits of which last less than one
year. Examples are wages of workmen, interest on borrowed capital, rent, selling expenses,
and so on.
Expenditure on consumable items, on goods and services for resale either in their original or
improved form. Examples are purchases of raw materials, office stationery, and the like. At the
end of the year, there may be some revenue items (stock, stationery, etc.) still in hand. These
are generally passed over to the next year though they were acquired in the previous year.
Expenditures incurred for maintaining fixed assets in working order. For example, repairs,
renewals and depreciation.