Which of the following is a revenue expenditure ?a)Freight paid on pur...
Well to find out that which one of is a revenue expenditure we hve to frst understand that what is revenue expenditure...so in revenue expenditure the benefits is received with an accounting year so its effect is temporary, neither an asset is required nor the value of an asset is increased and it reduces the profit of the business..now coming to the question.. so basically whitewashing of a building is necessary for its(building of factory) maintenance and bcz of this expenditure the profit earning capacity of the business has not increased so it is revenue expenditure...(bcz the expense is incurred for the maintenance of the structure)
Which of the following is a revenue expenditure ?a)Freight paid on pur...
Revenue Expenditure:
Revenue expenditure refers to the expenses incurred by a business that are related to its day-to-day operations and are expected to provide benefits only in the current accounting period. These expenses are typically recurring in nature and are deducted from the revenues to determine the net profit of the business.
Options:
a) Freight paid on the purchase of plant and machinery
b) Legal expenses paid to acquire a property
c) Annual white wash of the factory building
d) Expenses incurred to reduce working capital requirement
Analysis:
Let's analyze each option to determine which one is a revenue expenditure:
a) Freight paid on the purchase of plant and machinery:
This expense is directly related to the acquisition of plant and machinery, which are usually long-term assets. Therefore, the freight paid on their purchase would be considered as part of the cost of acquiring these assets and would be capitalized as part of the asset's cost. It is not considered a revenue expenditure.
b) Legal expenses paid to acquire a property:
Similar to option (a), legal expenses incurred to acquire a property are considered part of the cost of acquiring the property and would be capitalized. Therefore, it is not a revenue expenditure.
c) Annual white wash of the factory building:
The annual white wash of the factory building is a recurring expense that is necessary to maintain the building in a good condition and create a clean working environment. This expense does not provide any long-term benefits and is expected to be incurred on an annual basis. Therefore, it is considered a revenue expenditure.
d) Expenses incurred to reduce working capital requirement:
This option is not specific enough to determine whether it is a revenue or capital expenditure. The nature of the expenses and their purpose would need to be further clarified to make a definitive determination.
Conclusion:
Based on the analysis, option (c) - annual white wash of the factory building - is the only expense that qualifies as a revenue expenditure. The other options involve expenses that are considered part of the cost of acquiring assets and would be capitalized.