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Which one of the following is NOT true about revenue expenditure?

A)  These are the running expenses of the business

 

B)  They improve the financial position of the business

 

C)  They reduce the profit of the concern

 

D)  They do not appear in the balance sheet

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Question added by Shazia Anees , Assistant Manager Finance , Arham Trading Company
Date Posted: 2015/06/11
Shahbaz Hayder
by Shahbaz Hayder , Group Head of Finance , Sharif Group of Companies

Option B is the right answer.

Bilal Bilal Ashraf
by Bilal Bilal Ashraf , Assistant Accountant and Office Admin , Hamdaani Food Company

They improve the financial position of the business. (option B)

Wasim khan wazir
by Wasim khan wazir , Finance Specialist , Mott Macdonald

A revenue expenditure is a cost that is charged to expense as soon as the cost is incurred. By doing so, a business is using the matching principle to link the expense incurred to revenues generated in the same accounting period. This yields the most accurate income statement results.

There are two types of revenue expenditure:

  • Maintaining a revenue generating asset. This includes repair and maintenance expenses, because they are incurred to support current operations, and do not extend the life of an asset or improve it.
  • Generating revenue. This is all day-to-day expenses needed to operate a business, such as sales salaries, rent, office supplies, and utilities. So, we can Say Option B correct one.

Muhammad Ramzan Tufail  ACCA
by Muhammad Ramzan Tufail ACCA , Assistant Finance Manager , Eltizam Asset Management Group

B)  They improve the financial position of the business......................///////////