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Standard XII
Accountancy
Preparing Financial Statements of NPO-I
Which of the ...
Question

Which of the following is deferred revenue expenditure?

A
High legal expenses incurred by the company to defend legal suit of a 10,00,000.
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B
Sales promotion expenses amounting to Rs.50000.
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C
Rs. 10000 spent on dismantling of old Plant and Machinery.
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D
All the three.
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Solution

The correct option is B High legal expenses incurred by the company to defend legal suit of a 10,00,000.
Deferred revenue expenditure is an expenditure which is revenue in nature and incurred during an accounting period but the benefits from this is to be arrived in coming years.
Therefore high legal expenses to defend a legal suit is a revenue expenses otherwise but its benefits will also arise in future too, hence this has to be treated as deferred revenue expenditure.

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Q. Legal expenses incurred to defend a suit for breach of a contract to supply goods will be treated as___________.
Q. Classify the following expenditures as intermediate consumption expenditure and final consumption expenditure.
(i) Expenditure on research and development by Tata.
(ii) Insurance premium paid by a firm to an insurance company.
(iii) Insurance premium paid by households to an insurance company.
(iv) Expenditure on repairs and maintenance of plant and machinery.
(v) Expenditure incurred by a firm on purchase of equipments.
(vi) Advertising expenditure incurred by Airtel on promotion of Its products.
(vii) Business expenses of the employees on tour and entertainment.
Q. Match List I with List II and select the correct answer using the codes given below the lists.
List I List II
A. Heavy advertisement expenses 1. Capital expenditure
B. Travelling expenses of the salesman 2. Revenue expenditure
C. Profit on the sale of office building 3. Capital gain
D. Purchase of plant and machinery 4. Deferred revenue expenditure
Q. Match List-I(Item of expenditure/receipt) with List-II(Nature of expenditure/receipt) and select the correct answer using the codes given the lists.
List-IList-II
I. Carriage charges a new machine purchased for factory(a) Revenue receipt
II. Legal expenses incurred in defending a case of violation of a provision of Factories Act(b) Revenue expenditure
III. Grant-in-aid received from the Government for the construction of a building(c) Deferred revenue expenditure
IV. Amount received for a part of the office building sublet(d) Capital expenditure
(e) Capital receipt

Q. Match List-I(Items of expenditure and receipt) with List-II(Nature of expenditure and receipt) and select the correct answer using the codes given the lists.
List-IList-II
I. Premium paid for a lease hold property(a) Revenue expenditure
II. Insurance premium paid for risks against accidental losses of properties(fixed assets)(b) Capital receipt
III. Amount realised from the sale of securities(investment)\ purchased earlier(c) Deferred revenue expenditure
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