When a heavy expenditure of revenue nature is incurred for getting the benefit over a number of years, then it is called as deferred revenue expenditure. For example:-
- Preliminary expenses at the time of formation of new limited companies.
- Heavy advertisement expenses.
- Heavy Research and development expenses.
- Commission on issue of shares and debentures.
- Major repair expenses.
- Discount on issue of shares or debentures
- Expenses relating to shifting the business premises from one place to other place.
Though, these expenses are incurred in current financial year even then they should not be fully booked in current year because the benefit of such expenses is extended beyond the year in which they are incurred and can be divided in appropriate number of years. The portion of the expenses will be booked in current financial year and the balance will be shown in balance sheet in asset side. By doing this the profit of the current year also will not be affected in abnormal way.
- Learn Accounting, Free Accounting Tips
- General Accounting Terms
- General Tips Relating to Indian Income Tax Act
- Free Tally Learning
- General Tips Relating to Sales Tax-VAT