Deferred Revenue ExpenditureSometimes, expenditure is of revenue nature, but the benefit of the expenditure is available for more than a year. In such a case, it is not fair that the total expenditure should be debited to the Profit and Loss Account only in one year. It is to be charged over the period over which the benefit is available. Such expenditure is known as deferred revenue expenditure.
Deferred revenue expenditure is the expenditure for which the payment has been made or the liability has been incurred, but which is carried forward on the presumption that it will be beneficial over the subsequent period or periods. It refers to that expenditure that is for the time being deferred from being charged against an income. Such expenditures shall be written off generally over a period of 3 to 5years.
Note: The unwritten off portion of deferred revenue expenditure is shown on the asset side of the Balance Sheet under the head â€˜Miscellaneous Expenditureâ€™.
Example: Heavy advertising expenditure for the launch of a product, discount on issue of shares & debenture, preliminary expenses, etc.