XYZ Limited has a house for 3 years. It used it as guest house. Now it incurred an expenditure for Rs. 2,50,000 for repairing the roof of this house. Expenses incurred on such repairs are:-
  • a)
    Capital Expenditure
  • b)
    Revenue Expenditure 
  • c)
    Deferred Revenue Expenditure 
  • d)
    None of the above. 
Correct answer is option 'C'. Can you explain this answer?

CA Foundation Question

Aditi Kamra
Aug 24, 2018
Deferred Revenue Expenditure is an expenditure which is revenue in nature and incurred during an accounting period, but its benefits are to be derived in multiple future accounting periods.

These expenses are unusually large in amount and, essentially, the benefits are not consumed within the same accounting period.

Part of the amount which is charged to profit and loss account in the current accounting period is reduced from total expenditure and rest is shown in the balance sheet as an asset (fictitious asset, i.e. it is not really an asset).

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