What is deferred revenue expenditure ?

Hi Rupali,

These are the expenses that are of revenue nature but the benefits of such expenses can be availed for a long period of time. In simple words, these expenses are incurred but the effects of such expenses are not so rapid and occurs after a period of time. Another important point that you should note regarding deferred revenue expenses is that such expenses does not create any assets for the organisation.

Examples Some of the examples of deferred revenue expenditure are advertisement expenses, expenses on training, etc.

(1)  Let's suppose that a new business organisation incurs Rs 1,00,000 on advertising its product. But, this is sure that such expenditure is not going to be reflected rapidly in terms of its sales and revenues. That is, over a period of time, say couple of months (in some cases even a year's time) there occurs a rise in the sales and revenues (due to the advertisement expense incurred earlier).

(2) Similarly, expenses incurred by an organisation in training its employees will surely add to their skills and efficiency. But the positive results in terms of increase in output production and fall in cost of production (as the employees are more efficient after training) can happen over a period of time.

Thus, in both the above examples, we can observe that the benefits of the expenses so incurred are not immediate and have delayed effects. 

For further doubts, do get back to us.
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