Part of the amount is shown in profit and loss account and is reduced from total expenditure and rest is shown in balance sheet. Which means “Holding something back for a later time”. Deferred expenditure refers to expenses incurred which do not apply to the current accounting period. The remaining portion of the expenditure is carried forward and is known as capital expenditure or or deferred revenue expenditure and is shown as an asset in the balance sheet. Definition of Deferred Expense. Deferred Revenue Expenditure: - In some cases, the benefit of a revenue expenditure may be available for period of two or three or even more years. Item such as preliminary expenses, cost of issue of debentures are examples that may be classified under this head. Deferred Revenue and Expenditure – Asset and Liability Method. These expenditure does not result in an asset creation. The Concept of Accounting explains the type of Deferred Revenue Expenditure is added. It is also called as unearned revenue or deferred income. A deferred expense is a cost that has already been incurred, but which has not yet been consumed. In some cases, the benefit of revenue expenditure may be available for a period of two or three or even more years. Deferred Revenue Expenditure. There are two methods of recording revenue and expenditure deferrals, this first is the asset and liability method shown immediately below, and the second is the revenue and expenses method detailed later in this post. Such expenditure is then known as "Deferred Revenue Expenditure" and is written off over a period of a few years and … A good example is that of a magazine subscription business where this revenue is a part of the business. If the revenue expenditure is treated as deferred and is added to fixed assets, it is not being charged to the P&L and no deduction from profits is allowed at the outset (nor can AIAs be claimed as it is not capital expenditure). While revenue expenditure is a simple concept, deferred revenue expenditure is slightly more complicated. What is a Deferred Expense? Thus, the Company reports it as a deferred revenue a liability than an asset until the time it delivers the products and services. It will be easier to understand the meaning of deferred revenue expenditure if you know the word deferred. Exceptions to General rules: Deferred Revenue expenditure are usually large in amount and benefits are not consumed within the same accounting period. In the Balance Sheet of 2015-2016 Rs.9000 will be treated as Prepaid Insurance, a current asset. Certain expenses though of revenue nature but likely to give benefit for more than one accounting year are treated as Deferred Revenue Expenditure like Advertisement expenses. 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