If the benefit of expenditure extends upto only for one accounting period, it is called:

Question

Accepted Answer

The correct option is 2:
Revenue Expenditure refers to costs incurred in the normal course of business to maintain assets or operate the company, and its core characteristic is that the economic benefit is fully consumed or exhausted within the current accounting period, usually one year. Examples include salaries, rent, utilities, and routine repairs. For this reason, these expenditures are considered operating expenses (OpEx), are fully matched against the revenue of that same period, and are recorded directly on the Income Statement (Profit and Loss Account). Since the benefit of these expenses is short-lived and does not create a long-term asset, they are correctly classified as a 'Revenue Expenditure' per fundamental accounting principles.

The incorrect option is 1:
Capital Expenditure is a spending that results in the acquisition of an asset or significantly enhances the value or extends the useful life of an existing asset. The key distinction is that the benefit of a capital expenditure (CapEx) is expected to be received over *more than one* accounting period. For example, purchasing machinery or constructing a building provides a long-term benefit. Therefore, its cost is capitalized on the Balance Sheet and systematically spread out over its useful life as depreciation, which directly contradicts the condition of the benefit extending "upto only for one accounting period."

The incorrect option is 3:
Noting Charges are specific, minor legal expenses incurred when the holder of a dishonored Bill of Exchange engages a notary public to formally record the fact of the non-acceptance or non-payment. While these charges are an expense of the current period and are therefore a type of revenue expenditure, the term itself is too narrow. It is a specific transaction cost relating to negotiable instruments and is not the broad, general accounting classification for *any* expenditure whose benefit is limited to one accounting period.

The incorrect option is 4:
Underwriting is a financial service where an investment bank or financial institution guarantees that a company's shares, debentures, or loans will be subscribed to, essentially guaranteeing the fundraising process. The 'underwriting commission' or fee is the cost paid for this guarantee. This cost is an expenditure incurred to raise capital and is typically treated as a preliminary or deferred revenue expenditure, a concept related to corporate finance and not the general accounting definition for all expenses with a one-year benefit period.