Deferred Revenue Expenditure In Balance Sheet

It will be easier to understand the meaning of deferred revenue expenditure if you know the word deferred which means holding something back for a later time or postpone.

Deferred revenue expenditure in balance sheet. Edurev ca foundation question is disucussed on edurev study group by 189 ca foundation students. When the company receives payment. Can you explain this answer. Thus it shows the balance of the benefit that it will reap in future on the assets of the balance sheet.

In the example from part 1 the company receives a 120 advance payment relating to a twelve month magazine subscription. The company receives cash an asset account on the balance sheet and records deferred revenue a liability account on the balance sheet. Deferred revenue expenditure denotes expenditure for which a payment has been made or a liability incurred which is essentially revenue in nature but which for various reasons like quantum and period of expected future benefit etc is written off over a period of time e g. The balance sheet is a snapshot at a single point in time of the companys accounts covering its assets liabilities and shareholders equity aug 30 2019 the remaining 800 is deferred revenue both an asset and a liability on a company s balance sheet.

Deferred revenue expenditure is expenditurethat is inherently revenue in nature but is treated as creatingan asset for balance sheet purposes rather than being booked tothe profit and loss account. Classification of deferred revenue expenditure. In early may your client is sued and you prepare a response and commence trial preparation. Expenses partly paid in advance.

It is how deferred revenue on the balance sheet will look like. You bill for 25 000 in services. Sep 02 2020 deferred revenue expenditure to the extent of not written off is shown in balance sheet under the head a miscellaneous expenditureb capitalc current liabilitiesd fixed assets correct answer is option a. In expenditure balance deferred sheet revenue of presentation.

Thus it will accrue its earning. Part of the amount is shown in profit and loss account and is reduced from total expenditure and rest is shown in balance sheet. That 25 000 appears as revenue on your firm s income statement for may. The cash flow statement for may reflects a 25 000 decrease in cash.

These expenditure does not result in an asset creation. It is when the firm derives a portion of the benefit in the current accounting year and will reap the balance in the future years. Deferred revenue expenditure are usually large in amount and benefits are not consumed within the same accounting period. Hence 1000 of deferred income will be recognized as service revenue.

Recording deferred revenue applies to the company s balance sheet. Expenditure on advertisement sales promotion etc. Now after working for a month mnc has earned 1000 i e it has provided its services to xyz.