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The expenditure whose amount is heavy and benefit of the likely to be derived over a number of years called
- a)Deferred capital expenditure
- b)Deferred revenue expenditure
- c)Both
- d)None
Correct answer is option 'B'. Can you explain this answer?
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The expenditure whose amount is heavy and benefitof the likely to be d...
In business, Deferred Revenue Expenditure is an expense which is incurred while accounting period. For example, revenue used for advertisement is deferred revenue expenditure because it will keep showing its benefits over the period of two to three years.
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The expenditure whose amount is heavy and benefitof the likely to be d...
Deferred Revenue Expenditure
In business, Deferred Revenue Expenditure is an expense which is incurred while accounting period. And the result and benefits of this expenditure are obtained over the multiple years in the future. For example, revenue used for advertisement is deferred revenue expenditure because it will keep showing its benefits over the period of two to three years. Thus, the profit and loss account statement is prepared as a periodic statement. Let us learn more about it in greater detail.
In business, Deferred Revenue Expenditure is an expense which is incurred while accounting period. And the result and benefits of this expenditure are obtained over the multiple years in the future. For example, revenue used for advertisement is deferred revenue expenditure because it will keep showing its benefits over the period of two to three years. Thus, the profit and loss account statement is prepared as a periodic statement. Let us learn more about it in greater detail.
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The expenditure whose amount is heavy and benefitof the likely to be d...
Ans:--- Option 'B' is correct because----~The word DEFERRED, means “ HOLDING SOMETHING BACK FOR A LATER TIME ”.~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).Example~Let’s suppose that a company is INTRODUCING a NEW PRODUCT to the MARKET and decides to spend a large amount on its advertising in the current accounting period. This marketing spend is supposed to draw benefits beyond the current accounting period.~It is a better idea not to charge the entire amount in the current year’s P&L Account and amortize it over multiple periods.~The image shows a company spending 150K on advertising, which is unusually large as compared to the size of their business.~The company decides to divide the expense over 3 yearly payments of 50K each as the benefits from the spend are expected to be derived for 3 years.
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The expenditure whose amount is heavy and benefitof the likely to be derivedover a number of yearscalleda)Deferred capital expenditureb)Deferred revenue expenditurec)Bothd)NoneCorrect answer is option 'B'. Can you explain this answer?
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