Deferred Revenue Expenditure
Deferred revenue expenditure means the expenditure, the benefit of which is accrued in more than one accounting period. In other words, it means that the expense that has been incurred at once, its benefit shall be received in the coming years as well. If the whole expense is debited in the current year, it may lead to an underestimation of the profit of the business and the balance sheet may not depict the correct financial position of the business. So, this expense is distributed over the different years in terms of the benefit that are estimated to be received every year.
Adjustment:
A. If Deferred Revenue Expenditure is given outside the trial balance:
- Will be shown in the Dr. side of the Profit & Loss A/c.
- The balance amount shall appear as an asset on the Assets side of the Balance Sheet.
B. If Deferred Revenue Expenditure is given inside the trial balance:
Only the balance amount shall appear as an asset on the Assets side of the Balance Sheet.
Financial Statement with Adjustment with Examples-V
Through adjustments in the financial statement, we consider all the accounting items which are relevant to the current financial year, but not recorded in the books due to any reason or wrongly recorded. This helps us in getting the actual profit or loss for the year and the accurate financial position of the company. Six basic adjustments, like Use of Goods in Business, Manager’s Commission on Profit, Deferred Revenue Expenditure, Contingent Liability, Sale of Goods on Sale or Return Basis, Goods in Transit are discussed below.