What are revenue expenditure and how can it be used by a company? Revenue expenditure is the cost of a product divided by its gross value. When you calculate your company’s revenue expenditure, you are essentially calculating your gross profit. So how can you use what is revenue expenditure to improve your profits?
When you add up all the costs that your company has incurred for the last year, what you come up with is your gross value. This will include your sales, your labour costs, your supplies, your advertising costs and all the other miscellaneous costs that are common in any business. Now, this is where you can take this information and use it to improve your profit margin. If you found out that your company spends more money on sales than on the production of new products, then you can consider cutting down on the production costs and increase your sales.
So, what is revenue expenditure? Revenue expenditure is what you should look at when setting your goals, your future financial projections and also planning. When you know what is revenue expenditure? You know what is the amount of money that your company is going to spend in a month, a year or a period of time. The expenses that you need to consider are your fixed costs such as salaries and your fixed assets such as capital stock.
But what is revenue expenditure? There are different types of expenditure and the type of expenditure that you should keep track of is your variable costs. These include your variable costs such as leasehold improvements, land rent, machines and materials, furniture and inventory. You may also have administrative expenses such as insurance premium, stamps, sales tax and payroll charges. Variable costs are something that can change drastically in the future which is why it is important to know what is revenue expenditure?
So, how do you plan for your future? You need to make a budget that will help you keep track of all your variable costs and see what is revenue expenditure? This is the only way to know if you have enough money at hand for the future. Without a budget you may find that your future is anything but smooth.
Once you have a budget you need to work out the disposable income. This is simply the money that you know you will be losing due to any number of expenses. This is not something you have to calculate because you can simply go by the figures in your budget. However, knowing the figure will give you an idea of the likely amount of surplus cash that you will have on hand. You then need to work out your net worth.
Your net worth is simply the total amount of cash that you currently have plus the amount of cash that you owe. Now that you know your net worth you need to know what is revenue expenditure? The cash flow problem arises when your assets increase but your liabilities decrease. In other words your assets are growing faster than your liabilities, but when liabilities decrease you need to make some more payments than before or else you will run out of cash.
So, what is revenue expenditure? Revenue expenditure is what is spent on things that will increase your revenue (your profits) and reduce your expenses (your taxes). For example, if you have an investment property you can deduct interest on that asset, even though you have not made any profit from it. Similarly, if you have used up all the capital that you have earned in the past you will not have any capital left and you will have to pay the capital gains tax on your share of the profits. That’s why we are always concerned with what is revenue expenditure?