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Deferred revenue expenditure denotes expenditure for which a payment has been made or a liability incurred which is essentially revenue in nature but which for various reasons like quantum and period of expected future benefit etc., is written-off over a period of time e.g. The announcement clarifies the treatment of the expenditure incurred on intangible items, which were treated as deferred revenue expenditure and ordinarily spread over a period of 3 to 5 years before AS 26 became mandatory (and also about those which do not meet the definition of an 'asset' as per AS 26). The assessee has amortized this deferred revenue expenditure amounting to Rs. Such expenditure is then known as "Deferred Revenue Expenditure" and is written off over a period of a few years and not wholly in the year in which it is incurred. The sale of scrap ` 1,000 is a capital receipt as it represents sale proceeds of Fixed Asset. lock #1 Introduction. The DTA or DTL is not in the same context as Deferred Revenue Expense but it is the recognition of Tax Value of certain adjustments available in the Income Tax in … MCQ's test-2. Major repair expenses. In accounting, the term purchase return specifies a transaction where the buyer of merchandise, inventory or fixed assets returns these defective or unsatisfactory products to the seller. Treatment of expenditure on training as deferred revenue expenditure – whether appropriate. lock #2 Loan account and section 37. lock #3 Loan account: when repayment is made in between the accounting year. However, this expenditure does not result in the acquisition of any fixed asset. For the purpose of allow ability of any expenditure under the Act , what is material is the classification between the capital and revenue and the same does not recognise any concept of deferred revenue expenditure. that expenditure incurred on factory license fees, trade mark fee, seed marketing expenses, public/capital issue expenses, preliminary expenses and rental paid for pre-commencement of retail stores, factories has been treated as deferred revenue expenditure which are being amortised over the life of the concerned items. 2005-06 Haldia Petrochemicals Ltd. V. JCIT, Rng-12 Kol. Posts about ind as icai written by caglobalindia. Audit of impersonal ledger - Capital expenditure, deferred revenue expenditure and revenue expenditure, Outstanding expenses and income, Repairs and renewals, Distinction between reserves and provisions, Implications of change in the basis of accounting. This amount is to be treated as a deferred revenue expenditure.as the benefit to be derived is not ascertained immediately The amount written off can be challenged by IT Dept stating that it is capital expenditure Nest Education We make you employable. Audit of assets and liabilities. Posted on 23 Feb 2019 by caglobalindia. While in contrast, revenue expenditures are the routine recurring expenditures take place in the normal business. It will be easier to understand the meaning of deferred revenue expenditure, if you know the word deferred,which means “Holding something back for a later time”. For example:-Preliminary expenses at the time of formation of new limited companies. 16 September 2008 DFERRED REVENUE EXPENSES: Any amount spent for expenses which has a characteristic of giving an enduring benefit over a period. CIT(A) assessee has claimed the deferred revenue expenditure as per the Guidance Note issued by ICAI on expenditure incurred during construction period. 9.4 The expenditure incurred on start-up and commissioning of the project, including the expenditure incurred on test runs and experimental production, is usually capitalised as an indirect element of the construction cost. Expenditures for developments,improvement and alterations are revenue expenditures but treated as capital expenditure. View Notes - AS-16-10 from FINANCE mba at Amity University. The ICAI in its guidance note issued on the 'terms used in financial statements' has defined the term 'deferred revenue expenditure' as the expenditure for which payment has been made or liability has been incurred in a particular year, but which is carried forward on the presumption that it will benefit over a subsequent period or periods. the club is a dis allowable expenditure? “After AS 26 comes into effect, there will hardly be an item in the account books that will be treated as deferred revenue expenditure; it will either be expenses or taken as an intangible asset,” said Avinash Chander, technical director of the Institute of Chartered Accountants of India (ICAI). TA to only report payment of Entrance fees and not to report on its allowability. Deferred Revenue Expenditure is a fictitious asset: Although it appears on the assets side of the Balance Sheet, it is not really an asset to the business. Capital and Revenue Expenditures and Receipts. lock. The assessee treated this expenditure as deferred revenue expenditure in its books of accounts and amortized Rs.2,40,000/- by debiting the same to the Profit and Loss Account of the relevant previous year. of revenue or expense as recognized in the statement of profit and loss and the corresponding amountwhich is recognized forthecomputationoftaxable income. When a heavy expenditure of revenue nature is incurred for getting the benefit over a number of years, then it is called as deferred revenue expenditure. For example, heavy advertisement expenditure is incurred on introduction of a new product in the market. Capital /Revenue and Deferred Expenditure Deferred Revenue Expenditure : The characteristics of Deferred Revenue Expenditure is as under :1 It is Revenue in nature.2 The benefit of the expenses does not expire in the same accounting year, but is spread over more than one year, normally 3 to 5 years.3 The period for which the expediture would provide benefit cannot be precisely … Recognition Fixed asset should be recognised as an asset when: Asset is brought to its working condition for its intended use i.e. 27) What is the meaning of purchase return in accounting? lock. These expenditures are not immediately written off in the year of actual expenditure but split over a period of certain years as per the decisions and policies of the management. #9 General doubt illustration 9 of icai book (Watch after treatment of JLP) lock #10 Self assessment test. The solved questions answers in this CA - CPT ICAI Model Test Paper - 2 quiz give you a good mix of easy questions and tough questions. lock. lock . Heavy advertisement expenses. Principle: Empire Jute co. Vs CIT124 ITR 1 SC Here we discuss deferred expenses examples of House Rent Expense, Consultancy Fees, and Insurance Fees. Main menu. "The Concept of Capital, Revenue & Deferred Revenue Expenditure" is one of the most fundamental accounting concept and is very essential to have … Skip to secondary content. For example, goodwill, rights, deferred revenue expenditure, miscellaneous expenses, preliminary expenses, etc., are examples of fictitious assets. Deferred Revenue Expenditure. capital expenditure • revenue nature : Bot Summary: The said deferred expenses would be amortized over five years from financial year 2006-07. That is why AO himself allowed the amount debited in the profit and loss account. Also, we discuss the differences between pre-paid expenses vs. deferred expenses. 16. About; Nest Education; Tag Archives: ind as icai Problems & Solutions on Ind AS- Preview version. expenditure on advertisement, sales promotion etc.. These expenses are unusually large in amount and, essentially, the benefits are not consumed within the same accounting period. voluntary retirement expenditure as a transitional measure in the revised AS 15, ‘Employee Benefits’. During the relevant previous year, the assessee incurred an expenditure of Rs.41,08,556/- on software development. ASB, ICAI SCOPE 4 •Thedeterminationoftheamountof •expense or •saving •relatedtotaxes onincome inrespect ofanaccounting period and •thedisclosure ofsuch an amountinthe financial statements. Reply . Skip to primary content. Death of partner. Hence we will classify it as revenue expenditure. Before Ld. Sometimes the benefit is delayed over months or even years. lock #11 Suggested answers. In other words, for accounting purposes, the concept of ‘deferred revenue expenditure’ has ceased to exist unless otherwise specified in standard, e.g. loss/expense and it may also be treated as deferred revenue loss. It is a recurring expenditure that occurs fairly frequently. Important Judgement Of Supreme Court On 'Matching Concept' And Deferred Revenue Expenditure Dear Subscriber, The following important judgement is available for download at itatonline.org . Q: Is production wages revenue or capital expenditure? Such expense is amortised over the period of benefit being derived from it. Accounting for revenue - the new normal: Ind AS 115 07 Scope of Ind AS 115 Ind AS 115 applies to contracts with customers to provide goods or services. to carryon the business more efficiently and effectively, it is revenue expenses. 7 3. Ans: Production wages is a revenue expenditure. Further as per para 56 of AS 26. … 17. 56. Online exam in Rectification of Errors in Fundamentals of Accounting for preparation of professional exams of ca cpt, ca foundation, cs foundation, cma foundation,and also for B.com, M.com, MBA (a) State with reasons whether the following are Capital Expenditure or Revenue Expenditure: (i) Expenses incurred in connection with obtaining a licence for starting the factory were ` 10,000. lock. 805.65 million for a period over five years after the ITA No.581 & 587/Kol/2009 A.Y. MCQ's test-1. Heavy Research and development expenses. It should be noted that As per Para 56 of AS-26 “Intangible Assets” issued by ICAI, Deferred Revenue Expenditure is not allowed in Balance Sheet. Commission on issue of shares and debentures. Expenditure on real estate (Continued) 3 development Livestock Except Fixed assets used to develop or maintain these activities but separable from those activities. Search. Assignment. Deferred Revenue Expenditure is an expenditure which is revenue in nature and incurred during an accounting period, but its benefits are to be derived over a number of following accounting periods. 3.1 Assessee further clarified that the expenses primarily consists of salary and travelling expenses. These expenditures are treated as assets and shown at the assets side of balance sheet. Treatment of subsequent expenditure on fixed asset as deferred revenue expenditure – whether appropriate 10 4. Deferred Revenue Expenditure: - In some cases, the benefit of a revenue expenditure may be available for period of two or three or even more years. Manoj Fadnis Member Central Council ICAI AS AS AS AS AS AS Implementation Issues 6 … 2. Other areas that could be affected include deferred and advanced payments, licensing arrangements, breakage and non-refundable upfront fees. ASB Workshop on Accounting Standards CA. Visit Our Book Store To Buy our Publications . In a number of judgements viz. 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