GK
ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Such expenses are taken to Profit and Loss Account in part every year and thus unwritten off portion may be allowed to stand in the balance sheet on the asset side.
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Such expenses are charged fully to the Profit and Loss Account of the year in which these are incurred.
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All of the above
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None of these
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Detailed explanation-1: -Like deferred revenues, deferred expenses are not reported on the income statement. Instead, they are recorded as an asset on the balance sheet until the expenses are incurred. As the expenses are incurred the asset is decreased and the expense is recorded on the income statement.
Detailed explanation-2: -Amount spent on mega advertisement campaign for launching a product is though a revenue expenditure but it is going to give the benefit in future too, hence this is considered as deferred revenue expenditure.
Detailed explanation-3: -Deferred Revenue expenditure are usually large in amount and benefits are not consumed within the same accounting period. Part of the amount is shown in profit and loss account and is reduced from total expenditure and rest is shown in balance sheet. These expenditure does not result in an asset creation.