What is Revenue Expenditure?
Revenue Expenditure refers to the estimated expenditure of the government in a fiscal year that does not affect the government’s assets and liabilities status. These expenses are incurred to ensure that government departments run efficiently and cover their ongoing costs, e.g. interest payments, pensions, salaries, subsidies, grants, etc.
Features of Revenue Expenditure:
- Nature: These are recurring expenses, meaning they occur regularly within a short period, typically within a fiscal year.
- Purpose: The main objective is to maintain the operational efficiency of the government or business. Examples include salaries, rent, utilities, and maintenance costs.
- Impact on Profit and Loss: Revenue Expenditures are fully charged against the income of the current period, directly affecting the profit and loss statement by reducing net income.
- Tax Treatment: These expenditures are usually deductible for tax purposes in the year they are incurred, helping to reduce taxable income.
- Examples: Salaries and wages; Interest payments on loans; Administrative expenses; Repair and maintenance expenses; and Utilities and office supplies.
Difference between Revenue Expenditure and Capital Expenditure
Revenue Expenditure and Capital Expenditure are two different kinds of budget expenditures. Revenue Expenditure refers to the spending incurred in the day-to-day running of government or business operations. However, Capital Expenditure (CapEx) refers to the spending on acquiring, upgrading, or maintaining physical assets such as property, industrial buildings, or equipment.
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