Deferred Revenue Expenditures: With Examples (Explained)

Most of all Heavy Expenditure of Revenue Nature and its benefits are likely to extend beyond the year in which it was in god is called Deferred Revenue Expenditure.

Deferred Revenue Expenditures

Deferred revenue expenditure is carried forward and is written off in subsequent accounting Years.

The Deferred revenue expenditure includes:

1. Heavy expenditure on advertisement and publicity for introducing.
2. New product preliminary expenses.
3. Brokerage and underwriting Commission on the issue of securities.
4. discount on the issue of securities.
5. Research and development expenses cost of removing the business to more Convenient premises.
6. Cost of heavy repairs.
7. Abnormal heavy losses like loss by fire load an earthquake etc.

Related:

• Revenue Income and Capital Income: Meaning, Differences, and Examples
• Capital Losses And Revenue Losses with Examples.
• Differences Capital Expenditures and Revenue Expenditures.

In conclusion and to clarify the following Questions is Deferred Revenue Expenditure:

1. Legal expenses incurred in raising a loan.
2. Cost of experimenting with the chemical product which did not result in success
3. $5000 Expended on Dismantling, Removing and Reinstalling of Plant and Machinery to a more Convenient location and $3,000 paid for the removal of stock to the new site.
4. $20000 were spent on heavy advertisement in connection with the introduction of a new product.

Answers:

1. Expenses incurred from obtaining own or borrowed capital of the business is capital expenditure, but no asset is created by it. hence it is treated as deferred revenue expenditure.
2. Generally, Amount spent on experimenting on a product should be treated as deferred revenue expenditure and the return of his following years.
3. the factory has been removed to a more convenient site and benefits from the removal are long-lasting. $8,000 are carried forward and written-off in the following accounting years.
4. Most of all Expenses incurred on the introduction of a new product are deferred revenue expenditure. because the benefits of the expenditure will occur for several years.

Difference between Capital Expenditure and Deferred Revenue Expenditure

Generally, the benefit of Capital Expenditure and Deferred Revenue Expenditure will accrue to the Business Enterprise for a long time. but in case of sale or winding up of business.

Thus, Capital Expenditure is capable to convert into cash by selling fixed assets but in case of Deferred Revenue Expenditure, the Business Enterprise cannot sell it to other firms.

Thus, now you know the Deferred Revenue Expenditures Explanation and Examples.

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