Bachelor of Business and Economics (BBE) Entrance – Math Practice Test

The question tests how costs are recognized in the income statement. Revenue expenditures are the costs that are consumed in the current period and are expensed immediately, because they relate to the ongoing operations of the business. For example, routine maintenance, utilities, and office supplies are charged to the income statement in the period they are incurred since they don’t create a lasting asset. In contrast, capital expenditures add to or improve long-term assets and are recorded on the balance sheet and depreciated over time, rather than expensed right away. Investment expenditures behave similarly to capital expenditures, aiming to generate future benefits. Financing costs like interest are typically recognized as expenses in the period as well, but the everyday period charge described here points to revenue expenditures. So, revenue expenditures are the type typically charged to the income statement in the period incurred.