Friday, July 4, 2014

Deferred Revenue Expenditure

Deferred Revenue Expenditure:- In some cases, the benefit of a revenue expenditure may be available for period of 2 or 3 or even more years. Such expenditure is  known as "Deferred Revenue Expenditure" &  is written off over a period of a few years and not wholly in the year in which it is incurred. For instance, a new org, may advertise very heavily in the beginning to capture a position in the market. The benefit of this advertising campaign will be available for  a few years. It will be better to write off the expenditure in 3 or 4 & not in the Ist year.

When loss of a specially exceptional  & heavy nature is incurred, it can also be treated as ,deferred revenue expenditure,.But,it should be noted, loss resulting from transactions entered into, such as sale of a large quantity of a commodity & speculative purchase , cannot be treated as a deferred revenue expenditure.

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