Heavy loss such as loss due to earthquake is treated as_____in the sense that they are written off over a period of 3 to 5 years.
Heavy loss such as loss due to earthquake is treated as_____in the sense that they are written off over a period of 3 to 5 years.
The correct option is C Deferred revenue expenditure
Sometimes, it may happen that the business enterprise may incur revenue expenditure, but the amount is so heavy that the benefit of the same would last for numbers of years. In that case, such expenditure should be capitalized and treated as deferred revenue expenditure. Sometimes, heavy losses due to the Act of God such as earthquake or flood can also be treated as deferred revenue expenditure.
Recording the whole expenditure in the same accounting year in which that expenditure was spent would decrease the profits of that year heavily. It is prudent policy that the whole of such expenditure should be spread over the number of accounting years over which the benefit is likely to occur.
Sometimes, it may happen that the business enterprise may incur revenue expenditure, but the amount is so heavy that the benefit of the same would last for numbers of years. In that case, such expenditure should be capitalized and treated as deferred revenue expenditure. Sometimes, heavy losses due to the Act of God such as earthquake or flood can also be treated as deferred revenue expenditure.
Recording the whole expenditure in the same accounting year in which that expenditure was spent would decrease the profits of that year heavily. It is prudent policy that the whole of such expenditure should be spread over the number of accounting years over which the benefit is likely to occur.
