Journal Entry For Deferred Revenue Expenditure

Examples of deferred revenue expenditure.

Journal entry for deferred revenue expenditure. In business deferred revenue expenditure is an expense which is incurred while accounting period. For example revenue used for advertisement is deferred revenue expenditure because it will keep showing its benefits over the period of two to three years. Deferred revenue expentuure journal enteries this query is. It is the revenue that the company has not earned yet.

Resolved report abuse follow query ask a query. There are two methods of recording revenue and expenditure deferrals this first is the asset and liability method shown immediately below and the second is the revenue and expenses method detailed later in this post. Journal entry of deferred revenue the following deferred revenue journal entry provides an outline of the most common journal entries in accounting. 13 october 2009 deferred revenue expenditure concept is no more in existence as per as 26.

Likewise the company needs to properly make the journal entry for this type of advance payment as deferred revenue not revenue. Deferred revenue expenditure is an expenditure which is revenue in nature and incurred during an accounting period however related benefits are to be derived in multiple future. Deferred revenue journal entry overview. Deferred revenue is the payment the company received for the goods or services that it has yet to deliver or perform.

And the result and benefits of this expenditure are obtained over the multiple years in the future. The firm makes a substantial investment in certain activities like sales promotion activities the benefit for which will be incurred over the number of accounting periods but the expenditure is born in the same year. 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. In simple terms deferred revenue means the revenue that has not yet been earned by the products services are delivered to the customer and is receivable from the same.

A deferred revenue journal entry is needed when a business supplies its services to a customer and the services are invoiced in advance. The expenditure has to be fully charged to p l in the first year itself.