Expenditure means that amount which has spend or will be spent by business on the purchase of goods and to avail the services. These can be in cash or on credit or in the fund. Examples of expenditure for business are shown as following:
- Purchase of
- Raw Material/Stock
- consumable items
- Bill of Electricity
- Wages and Salaries
- Rent for building
- Taxes and duties
- Postage and Telegram
- Mobile and Telephone
Types of Expenditures:
The expenditure is of two types. These are shown below:-
- Capital Expenditures
- Revenue Expenditures
1. Capital Expenditure: –
Capital expenditure is that amount spend on the more valuable goods or services which is used for a long duration i.e. more than one year. In other words, the amount spent on the creation of capital asset or to increase the working capacity of the existing asset is known as capital expenditure. Because of the huge amount invested in this process so we have to capitalize this amount.
In short, we will drive the benefit from these expenditures in the current year as well as in the future year also.
Purchase of new Plant and Machine, the creation of a new building or expansion of an old building, purchase of a new car, furniture, computer etc.
2. Revenue Expenditure: –
Revenue expenditure is that amount spend on the more goods or services which is used/consumed in a short duration i.e. within the one year. In other words, The amount spends on running the process of production and sale of goods. These expenses are routine expenses and will have to pay again and again
In short, we will drive the benefit from these expenditures in the current year only.
Salary & wages, Rent, Office & factory Electricity, Freight Inward & outwards, Travelling Expenses, Marketing Cost, Publicity and Advertisement, Postage and Telegram, Printing and Stationery, Mobile and Telephone, Staff welfare, Repair and maintenance, insurance, etc.
Check out the difference between capital and revenue expenditures click on the below link:-
You can also read the following topics: –
- Assets – Meaning, Definition, Types and Examples
- Liabilities – Meaning, Types and Examples
- What is Capital – Meaning and Example
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