Expenses whose benefit expires within the year of expenditure and which are incurred to maintain the earning capacity of existing assets are termed as ____________.

Capital expenditure

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Revenue expenditure

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Deferred revenue expenditure

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None of the above

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Solution

The correct option is C Revenue expenditure
Revenue expenditure are extra expenses incurred on an asset but these expenditure don't add any additional value to asset or increase its useful life.

They are incurred to maintain the earning capacity of existing assets. They are necessary to keep the asset running. These are reported in the income statement.

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