Question

Which of the following is a deferred revenue expenditure?

• A. Legal expenses incurred on the purchase of land.
• B. Expenses on a mega advertisement campaign while launching a new product.
• C. Expenses incurred on installation of a new machine.
• D. Wages paid for construction of an additional room in the building.

Answer 1

The correct option is B Expenses on a mega advertisement campaign while launching a new product.

Revenue expenditure can be classified as:

Revenue expenditure: Expenditure which are spent on day to day basis for smooth running of the business.

Deferred revenue expenditure: Expenses which are of revenue nature but gives the benefit to the business in coming years ahead are called deferred revenue expenditure. Amount spent on mega advertisement campaign for launching a product is though a revenue expenditure but it is going to give the benefit in future too, hence this is considered as deferred revenue expenditure.