Revenue expenditure is money spent on materials and services which are consumed by a business enterprise in carrying out normal business activities and maintenance of fixed assets. In order words, revenue expenditures are incurred to maintain the earning capacity of the business enterprise. The direct benefit of such expenditure is exhausted in the accounting period itself or one year at the most. Examples are:

(a)    The cost of finished goods or materials used in the manufacture of goods intended for resale.

(b)    Establishment costs, that is, rent, rates, heat, light, repairs to property etc.

(c)    Administrative costs, that is, wages, salaries, telephone, postage, stationery.

(d)    The costs of selling and distributing the goods, that is, commission, advertising, carriage outwards, etc.

(e)    Financial costs, that is, cash discount, interest on borrowings.

(f)    All expenses incurred for maintaining the efficiency or upkeep the fixed assets by means of repairs, replacement, renewable and insurance.

Costs incurred for items that will provide economic benefits only during the current accounting period or maintain the efficiency of the assets are called revenue expenditures.

The aim and object of the expenditure is not for the purpose of bringing into existence any such asset or advantage but for running the business or working it with a view to produce profits, it would be a revenue expenditure. The question whether a particular benefit is of permanent nature would depend upon the fact and circumstances of each case, the concept or permanency being relative.
Moreover, certain expenditure might seem to be revenue in nature though in practice these are treated as capital expenditures since they lead to the establishment of business and its efficient running. The most important:

(a)    Preliminary expenses.

(b)    Cost of issuing shares and debentures.

(c)    Cost of experiments.

(d)    Interest on capital especially where the nature of business requires constructions work for a long period, before the commencement of the production.

(e)    Legal expenses incurred to acquire the assets.

(f)    Repairs on purchases of second-hand asset to put it into workable condition.

(g)    The cost of special advertising campaign for the purposes of introducing new products.

(h)    Development expenditure incurred on rubber plantations, horticulture coal mines etc.

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