Which of the following transactions is a revenue expenditure?
Answer Details
The transaction that is a revenue expenditure is the "purchase of fuel for a vehicle".
Revenue expenditures are expenses incurred in the normal course of business operations that are aimed at generating revenue in the current accounting period. These expenses are not expected to provide long-term benefits to the company. In other words, revenue expenditures are incurred to maintain and operate a business.
In the case of purchasing fuel for a vehicle, this is an expense that is required for day-to-day operations of the vehicle. This expense is essential for the vehicle to run and carry out business activities, but it does not provide any long-term benefit to the company. Therefore, it is considered a revenue expenditure.
On the other hand, the purchase of plant and a new engine are examples of capital expenditures. These are expenses that are incurred to acquire assets that are expected to provide benefits to the company for several years. The construction of an office wall may also be a capital expenditure if it improves the value or usefulness of the office space beyond the current accounting period.