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DEPARTMENT OF TECHNICAL

EDUCATION ANDHRAPRADESH
Name : N. USHA RANI
Designation : Lecturer
Branch : Commercial & Computer
Practice (CCP)
Institute : GPW/Guntur
Year/Sem : III Sem
Sub-Code : CCP-302
Subject : ACCOUNTANCY-II
Topic : NON-TRADING CONCERNS
Duration : 50 minutes
Sub Topic : Revenue Expenditure and Revenue Reciepts
Teaching Aids : PPT ANIMATIONS
Objectives

At the end of the period, you would be able to:


 Understand the terms
 Revenue expenditure
 Revenue receipt

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Recap
In the previous class we have already learned
 The Meaning of
 Capital Expenditure
 Capital Receipt
Meaning of Revenue Expenditure
& Revenue Receipt

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Revenue Expenditure is incurred:-

 To meet day to day expenses of concerns.

 Arise in the Normal Course of Business

 Are Recurrent in Nature

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Examples of Revenue Expenditure:

(a) Expenses on Repairs, renewals, replacements


for maintaining the existing Fixed Assets.

(a) Purchase of goods for resale and for consumption


such as bar materials, foods, cigars, medicines etc.

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Examples of Revenue Expenditure:

(a) Salaries, wages, Rent, Taxes, Light


charges, Audit fees etc.
(a) Depreciation Fixed Assets, interest on
loans and miscellaneous expenses.

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Meaning of Revenue Receipts.

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Revenue Receipts

 Receipts other than capital receipts

 Used to meet the current expenditure

 They arise in the Normal Course of Business

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Example : 1
 Classify expenses into capital and revenue.

 A sum of Rs. 4,000 has been spent on a machine


as follows

1. Rs. 2,000 for addition to double the output

 2. Rs. 1,200 for repairs necessitated by negligence

 3. Rs. 800 for replacement of worn parts

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Solution 1 :

 Rs. 2,000 has been spent


 to improve the capacity of the fixed asset.
 Therefore it should be capitalized.

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Solution 2 :

 Cost of repairs whether necessitated


 due to negligence or otherwise
 is of revenue nature.

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Solution 3 :

Replacement of worn out parts


 neither increases the efficiencynor capacity
 but maintains the fixed asset in working condition
 hence revenue expenditure.

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Assignment

 State which item of expenditure would be charged to


capital and which is to Revenue.
 Rs. 300 spent on repairs of a second hand machinery
before using it

 Rs.2,000 was expended on painting the new factory.

 Freight and carriage on the new machine was Rs.300.

 Erection and installation charges on a newly purchased


machine is Rs.500

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Summary
 We have discussed about

 Meaning of Revenue Expenditure


Meaning of Revenue Receipt.

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Quiz
(1) Payment of Salaries to staff comes under the head

(a) Revenue expenditure

(b) Revenue receipt

(c) Capital expenditure

(d) Capital receipt

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(1) Interest on Investments received comes under the head

(a) Capital expenditure

(b) Revenue expenditure

(c) Revenue receipt

(d) Capital receipt

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Frequently Asked Questions
(1) Define Revenue expenditure and give five
examples.

(2) What is Revenue Receipt.

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