What is revenue expenditure?

• A. Purchase of long-term assets.
• B. Revenue expenditure refers to day-to-day operating costs incurred regularly to maintain operations, such as wages, energy costs, and raw materials.
• C. Debt repayment.
• D. Investment in expansion projects.

Answer: (B)

Revenue expenditure refers to the day-to-day costs required to run the business and keep operations going. These costs are recorded as expenses in the income statement in the period they are incurred, and they include wages, energy costs, and raw materials. They don’t create lasting assets for the business; instead, they support current activities and are consumed within the period.

This is different from spending on long-term assets or expansion, which is capital expenditure. Those outlays are kept on the balance sheet as assets and are depreciated over time, reflecting their benefit across multiple periods. Financing actions like repaying debt don’t count as operating costs either; they reduce cash and liabilities but don’t represent the cost of producing current revenue.

So, the option describing day-to-day operating costs incurred regularly to maintain operations best captures what revenue expenditure is.