Multiple choice

Revenue expenditure is defined as

  1. expenditure which contributes to the revenue earning capacity for a particular accounting period

  2. expenditure which contributes to the revenue earning capacity for two accounting periods

  3. expenditure which contributes to the revenue earning capacity for more than two accounting periods

  4. expenditure which contributes to the revenue earning capacity for indefinite accounting period
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A Correct answer
Explanation

Revenue expenditure is incurred to maintain the earning capacity of a business for a specific accounting period only. It provides benefits within that single period and is fully charged to the profit and loss account of that year. Options referring to two or more periods describe capital expenditure characteristics, which provide long-term benefits and are not consumed in one period.

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