Deferred Revenue Expenditure

In accounting all expenses which are incurred for generating the revenue for the accounting or financial year is to be accounted for in the same year so that company does not deviate from matching concept of accountancy according to which a company should account for all the costs which are incurred in generating the revenue for a particular period. However there are some expenses which cannot be accounted in this way and they are called deferred revenue expenditure.

Deferred revenue expenditure refers to that expense which is incurred in the current year but the benefit of it will be spread over 2 to 5 years and hence full amount of expenditure is not shown in the current year rather it is spread over the years. Examples of deferred revenue expenditure are advertisement costs incurred, training expenses for employees of the company. Accounting treatment for deferred revenue expenditure would be as follows –

In profit and loss account the firm will show only part of deferred revenue expenditure every year while remaining balance is shown as asset in the balance sheet and every year the company will transfer a fixed amount to profit and loss account until it reaches zero in the balance sheet.

0 comments… add one

Leave a Comment

Related pages

payback period advantageswhat is conservatism conceptlimitation of barter systemdrawbacks of venture capitalformula for operating leveragedifference between bills receivable and accounts receivablethe advantages and disadvantages of globalizationwhat is bearer chequenet worth calculation of companyfx direct quotedemerit of internetdemand loansdefinition of a traditional economyvertical analysis of a balance sheetadjusting unearned revenuemarketing skimming definitioncapitalism positivesearned but unbilled revenueadvantage and disadvantage of globalizationdefinition of fixed capitalcross exchange rate formulafull form of tdsdifference between capitalism and mixed economywhat are the advantages and disadvantages of decentralizationdefine accounting conventionsadvantages and disadvantages of socialist economyexplain traditional economyadvantages and disadvantages of delegation in managementfright means in hindidisadvantages of a bank loanfactors that affect the elasticity of demandeffectiveness of autocratic leadershipdistinguish between micro and macro economicwhat is unsystematic riskdefine complimentary goodsslr fullformdupont analysis formulawhat is an autocratic leadership styleadvantages and disadvantages of planned economyexample of explicit costdefine unitary elasticmarket segmentation advantagesskimming policyimportance of horizontal analysismixed economy in nigeriacharacteristics of monopolistic competition in economicsdirect and indirect quotationexamples of merchant banksregional rural banks meaningideal cibil scoreasba bankfeatures of globalisationrediscounting of billsfifo method inventoryexamples of monopolistic competition companiesadvantages and disadvantages of jitwho is consignor and consigneeimpulse buying meaningcash inflow examplesdisadvantage of command economyqualified and unqualified audit opinionadvantage of absorption costingwhat is profitability ratiojournal entry for deferred revenueroce formulavertical analysis of the balance sheetfictitious assets examplesideal liquidity ratioadvantages and disadvantages of monetary systemcharacteristics of forward contractfunctions of derivatives marketmixed economy advantages disadvantageswhat is fictitious asset