What Is Expenditure in Accounting Terms?

For businesses, expenditures represent money being paid out. However, there are two different types of expenditures: revenue and capital. The difference in these two types of expenditures are important to know for tax purposes.

Revenue Expenditure

A business’s revenue expenses can be found on its profit and loss statement, which details the money that comes in and goes out on a daily basis. This money does not add to the overall profit of a business. In effect, revenue expenditure represents the operating expenses incurred by all businesses. Some typical revenue expenses include:

• Supplies
• Utilities
• Salaries
• Marketing
• Training
• Recruitment

Capital Expenditure

A business that puts money out for the express purpose of building assets for the company is called a capital expenditure. These numbers can be found on the company’s balance sheet. Typical capital expenses include building or equipment. These items will last more than a financial year which means that the cost can be depreciated over time. For this reason, business must differentiate between the two different types of expenditures.

What is expenditure in accounting terms? Something that costs a business money is an expenditure. However, not all expenditures are created equally. For this reason, a business’s accountant will keep the revenue and capital expenses separate. In addition, a trustworthy business or accountant will not put items that should be in revenue expenditures under capital expenditures in order to gain a tax advantage. Doing this type of creative accounting is illegal and can result in auditing, fines or prosecution.