Revenue expenditure

What it means

Expenditure on the day-to-day running of the business, charged in full as an expense in the period incurred.

Example

Fuel for the van and repairs to it are revenue expenditure.

Why it matters

It is written off to the income statement, unlike capital expenditure which is capitalised.

In practice

Revenue expenditure is the day-to-day cost of running the business. It is used up within the accounting period and is charged in full to the income statement, which reduces profit for that year. It covers wages, rent, electricity, repairs and fuel, and the cost of maintaining existing non-current assets rather than improving them.

For example, RM1,500 spent servicing a delivery van is revenue expenditure. Fitting a new refrigeration unit that upgrades the van would be capital expenditure.

Students often confuse it with capital expenditure, which buys or improves non-current assets and is capitalised, then depreciated over several years. The key difference is how long the benefit lasts. Revenue expenditure is used up almost at once. Capital expenditure gives benefit over many periods. Charging a large capital item as revenue would wrongly cut one year's profit. Capitalising ordinary repairs would inflate both profit and the value of assets.

If you often put items in the wrong group, one of our teachers can sort through a past-paper list with you and explain each choice. Book a trial class.

Related terms

• Capital expenditure
• Expense
• Error of principle
• Materiality concept

Syllabus reference: Cambridge 0452 and 0985, syllabus for 2027 to 2029, sub-topic 4.1 Capital and revenue expenditure and receipts (page 14).

Definitions here are general accounting explanations for study. For your board's exact wording, see its official syllabus via Sources.