Question

Which of these is/are examples of revenue expenditure ?

• A. Depreciation charges
• B. Factory insurance premium
• C. Production royalty paid
• D. All the three

Answer 1

Answer: (D)

All the three

Spending money or incurring a liability for some benefit, service or property received is called expenditure. Payment of rent, salary, purchase of goods, purchase of machinery, purchase of furniture are examples of expenditure. If the benefit of expenditure is exhausted within a year, it is treated as an expense (also called revenue expenditure). A revenue expenditure is a cost that is expensed in the accounting year in which it is incurred. In other words, the cost will be matched with the revenues of the accounting year in which the expenditure took place. Revenue expenditure are costs spent on fixed assets after they have been place in service. Depreciation charges, factory insurance premium, production royalty paid are all examples of revenue expenditure.