Deferred Revenue Expenditure
A heavy revenue expenditure, the advantage of which may be comprehensive over a number of years, and not for the present year alone is called deferred revenue expenditure. It is an expense which is profits in character and incurred throughout an accounting stage, but its advantages are to be consequent over a number of following accounting periods. For example, a new firm might promote very deeply in the commencement to confine a place in the market. The advantage of this advertisement operation will last for moderately a few years. It will be better to write off the expenses in three or four years and not only in the first year. These expenses are unusually huge in amount and, fundamentally, the advantages are not consumed within a similar accounting period.
- The advantage is enjoyed for more than one year
- It is non-recurring in nature
- Expenses incurred on research and development
- Irregular loss arising out of fire or lightning (in case the asset has not been insured).
- Huge amount spent on advertisement.