DEPARTMENT OF TECHNICAL

EDUCATION ANDHRAPRADESH
Name : N. USHA RANI
Designation : Lecturer
Branch : Commercial & Computer
Practice (CCP)
Institute : GPW/Guntur
Year/Sem : III Sem
Sub-Code : CCP-302
Subject : ACCOUNTANCY-II
Topic : NON-TRADING CONCERNS
Duration : 50 minutes
Sub Topic : Deferred Revenue Expenditure
Teaching Aids : PPT, ANIMATIONS
CCP102.54
Objective
On completion of the period, you would be able to
 Understand the term Deferred Revenue Expenditure

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Recap

 In the previous class we have discussed about

 Distinction between Trading and Non-Trading
concerns
 Capital expenditure
 Revenue Expenditure
 Revenue Receipt

CCP102.54
Recap contd:
 Trading concern carries on business for profit

 Non-Trading concerns are non-profit organisations

 Capital Expenditure incurred for acquiring

Permanent assets.

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4
Recap contd:

 Revenue Expenditure incurred for day to day

Expenses of firms.
 Capital Receipts are arises one of sale of Assets

 Revenue Receipts are other than Capital Receipts

 Incomes comes regularly Ex: Interest received , Rent

received etc

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5
Deffered Revenue Expenditure
 It is that class of revenue expenditure which is
incurred During an Accounting Period
 But is applicable either wholly or in part for further
periods
 Examples:
 a huge expenditure on advertisement of a new
product
 Cost of mines and Plantations (Rubber ,Tea , Coffee
etc.)

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Deffered Revenue Expenditure
contd.
 Certain expenses though of revenue character

not written off in one financial year.

 The Expenditure which Yields Benefits for
Several Years is Called Deferred Revenue
expenditure
Ex: Huge expenses on Advertisement

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7
The following Huge expenses are revenue
nature.

 Preliminary expenses

 Exceptional repairs.

 Heavy expenses on advertisements.

 Removal of machinery.

 Shifting of machinery.

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8
Accounting Treatment of Deferred Revenue
Expenditure

 These will be charged over a number of years in order

to maintain steady growth.
 The portion which is not written off is shown in the
Balance Sheet as Asset.

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9
Accounting Treatment of Deferred Revenue
Expenditure
 It is not advisable to write off the huge expenditure
of the above items in one financial year.

 Though revenue in nature these are charged

in parts to Profit and Loss Account or
Income and Expenditure Account.

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10
The following Huge expenses are revenue
nature.

 Shifting of machinery/ removal of

machinery from one place to another.

 Loss on issue of shares and debentures etc.

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11
Example (1):

 Classify the following expenses into Capital,

Revenue or Deferred.

1. The sum of Rs. 70,000 was spent on dismantling in

order to remove the machinery to more suitable place

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Solution:

 Removal of machinery from one place to another

suitable place does not increase efficiency and
income.
 Hence Revenue Expenditure.
 However, it can also be treated as Deferred Revenue
Expenditure.

CCP102.54

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Summary
 Though some expenditures like preliminary
expenses, Advertisement etc are revenue in nature
they cannot be treated as Revenue Expenditure

 If they are shown in one financial year there is

possibility of huge loss in that particular financial
year
 This may not represent true financial position

CCP102.54
Summary contd.
 Hence they are treated as deferred Revenue
Expenditure
 As this type of expenditure yields benefits for
Several years, some Expenditure is shown in one
financial year
 Remaining Balance is shown in the Balance Sheet
on Assets side
 In subsequent years, expenditure is written off
from the Asset

CCP102.54
Quiz

(1) Preliminary expenses are

(a) Revenue expenditure

(b) Revenue receipt

(c) Deferred revenue expenditure

(d) None of the above.

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(1) Deferred revenue expenditure is charged in
parts to

(a) Profit & Loss Account

(b) Income & Expenditure Account

(c) a or b

(d) None of the above

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(3) A portion of Deferred revenue expenditure amount
which is not written off is shown in

(a) Trading Account

(a) Profit & Loss Account

(c) Balance Sheet Assets side

(a) None of the Above.

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(4) Huge expenditure on Advertisement is

(a) Deferred Revenue Expenditure

(b) Capital Expenditure

(c) Capital Receipt

(d) None of the Above.

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(5) Depreciation of Fixed Assets is

(a) Deferred Revenue Expenditure

(b) Capital Expenditure

(c) Revenue Expenditure

(d) None of the Above

CCP102.54

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Frequently Asked Questions

(1) Explain the term Deferred Revenue expenditure

with examples

CCP102.54

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