Revenue expenditures are the expenditures incurred during normal business operations, and the company will receive the benefit from those expenses (Also see How Can Good Accountants Help in Growing Your Business and Reducing Your Expenses?) in the same accounting period. These are the expenses the company has spent when producing or providing goods or services that help to generate revenue for the business.
Generally, there are two types of revenue expenditure, one type is associated with the cost of goods sold, and another type is related to operating expenditure. Cost of goods sold is the expenses the company has spent to acquire goods or services that it needs for sale. On the other hand, operating expenses are the spending necessary for normal business operations (Also see Ways to Boost the Efficiency of Your Business) of a company.
Business owners need to record these expenses in the same accounting (Also see Accounting Standards in Malaysia) period when they generate revenue on the goods or services sold. This is to be in line with the matching principle of accounting. If you are not sure about how and when you should recognise the revenue expenditure, why don’t you consider hiring an bookkeeping firm in Johor Bahru? The professionals will be able to help you with this, and you don’t have to worry about the accuracy of your financial statements if you hand over the accounting-related tasks of your company to them.
From the explanation above, we know that revenue expenses are the expenses that the company will spend in its daily operations, and the effect of the spending will be put to use entirely within the accounting year that the expenses were incurred. Such expenses are recurring, and they are not included in the fixed asset cost. Therefore, you will see them appearing on the income statement of your business in the year they were incurred.
The wages you pay to your workers are considered as revenue expenditures. This is because these expenses are necessary for the normal operations of the business to earn revenue. Revenue expenditure also includes the selling expenses incurred to promote and market the products or services. Besides, the expenses that you spent on repairing and maintaining the assets that help to generate revenue for your business are one of the types of revenue expenditures too. This is because the costs incurred will only provide support to the current business operations, and this will not influence the useful life of those assets.
Electricity bills, water bills, and so on are the utility expenses your company needs to spend so that it can continue operating and earning revenue. Hence, they are part of the revenue expenditures because you will not be able to run the business effectively without these resources. Also, rental expenses make up part of the revenue expenditure as you need to rent the premises or other materials to run your business.
In short, revenue expenditures refer to the expenses the company has incurred when running its business operations. These costs will appear on the profit and loss statement of the company. Business owners will receive the benefits in the accounting period the cost was incurred, and they should charge the cost once incurred to comply with the matching principle. By applying this principle, the results that the profit and loss statement (Also see Guide to Understanding your Profit and Loss Statement) can provide to the business owners will be more accurate.