Deferred Revenue Expenditure

A heavy revenue expenditure, the benefit of which may be extended over a number of years, and not for the current year alone is called deferred revenue expenditure. For example, a new firm may advertise very heavily in the beginning to capture a position in the market. The benefit of this advertisement campaign will last for quite a few years. It will be better to write off the expenditure in three or four years and no tonly in the first year.

Characteristics

i. Benefit is enjoyed for more than one year

ii. It is non-recurring in nature

Examples

i. Expenses incurred on research and development

ii. Abnormal loss arising out of fire or lightning (in case the asset has not been insured).

iii. Huge amount spent on advertisement.