Definition: A revenue expenditure is a cost that you charge to expense as soon as you incur it. By doing so, you are using the matching principle to link the expense incurred to revenues generated in the same accounting period. 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, rent, office supplies, and utilities.
Other types of costs are not considered to be revenue expenditures, because they relate to the generation of future revenues. For example, the purchase of a fixed asset is categorized as an asset and charged to expense over multiple periods, to match the cost of the asset against multiple periods of revenue generation. These expenditures are known as capital expenditures.